GENERAL PROVISIONS death of the original owner, unless otherwise
Sec. 1. This Decree shall be known as "The Insurance
Code".
Sec. 2. Whenever used in this Code, the following
terms shall have the respective meanings hereinafter
set forth or indicated, unless the context otherwise
requires:chanroblesvirtuallawlibrary
(1) A "contract of insurance" is an agreement
whereby one undertakes for a consideration to
indemnify another against loss, damage or liability
arising from an unknown or contingent event.
A contract of suretyship shall be deemed to be an
insurance contract, within the meaning of this Code,
only if made by a surety who or which, as such, is
doing an insurance business as hereinafter provided.
(2) The term "doing an insurance
business" or "transacting an insurance business",
within the meaning of this Code, shall
include:chanroblesvirtuallawlibrary
(a) making or proposing to make, as insurer, any
insurance contract;
(b) making or proposing to make, as surety, any
contract of suretyship as a vocation and not as merely
incidental to any other legitimate business or activity
of the surety;
(c) doing any kind of business, including a
reinsurance business, specifically recognized as
constituting the doing of an insurance business within
the meaning of this Code;
(d) doing or proposing to do any business in
substance equivalent to any of the foregoing in a
manner designed to evade the provisions of this
Code.
In the application of the provisions of this Code the
fact that no profit is derived from the making of
insurance contracts, agreements or transactions or
that no separate or direct consideration is received
therefor, shall not be deemed conclusive to show that
the making thereof does not constitute the doing or
transacting of an insurance business.
(3) As used in this code, the
term "Commissioner" means the "Insurance
Commissioner". chanrobles virtual law library
Chapter 1
THE CONTRACT OF INSURANCE
Title 1
WHAT MAY BE INSURED
Sec. 3. Any contingent or unknown event, whether
past or future, which may damnify a person having an
insurable interest, or create a liability against him,
may be insured against, subject to the provisions of
this chapter.
The consent of the husband is not necessary for the
validity of an insurance policy taken out by a married
woman on her life or that of her children.
Any minor of the age of eighteen years or more, may,
notwithstanding such minority, contract for life, health
and accident insurance, with any insurance company
duly authorized to do business in the Philippines,
provided the insurance is taken on his own life and
the beneficiary appointed is the minor's estate or the
minor's father, mother, husband, wife, child, brother
or sister.
The married woman or the minor herein allowed to
take out an insurance policy may exercise all the
rights and privileges of an owner under a policy.
All rights, title and interest in the policy of insurance
taken out by an original owner on the life or health of
a minor shall automatically vest in the minor upon the
provided for in the policy.
Sec. 4. The preceding section does not authorize an
insurance for or against the drawing of any lottery, or
for or against any chance or ticket in a lottery
drawing a prize.
Sec. 5. All kinds of insurance are subject to the
provisions of this chapter so far as the provisions can
apply.
Title 2
PARTIES TO THE CONTRACT
Sec. 6. Every person, partnership, association, or
corporation duly authorized to transact insurance
business as elsewhere provided in this code, may be
an insurer.
Sec. 7. Anyone except a public enemy may be
insured.
Sec. 8. Unless the policy otherwise provides, where a
mortgagor of property effects insurance in his own
name providing that the loss shall be payable to the
mortgagee, or assigns a policy of insurance to a
mortgagee, the insurance is deemed to be upon the
interest of the mortgagor, who does not cease to be a
party to the original contract, and any act of his, prior
to the loss, which would otherwise avoid the
insurance, will have the same effect, although the
property is in the hands of the mortgagee, but any
act which, under the contract of insurance, is to be
performed by the mortgagor, may be performed by
the mortgagee therein named, with the same effect
as if it had been performed by the mortgagor.
Sec. 9. If an insurer assents to the transfer of an
insurance from a mortgagor to a mortgagee, and, at
the time of his assent, imposes further obligation on
the assignee, making a new contract with him, the
act of the mortgagor cannot affect the rights of said
assignee.
Title 3
INSURABLE INTEREST
Sec. 10. Every person has an insurable interest in the
life and health:chanroblesvirtuallawlibrary
(a) Of himself, of his spouse and of his children;
(b) Of any person on whom he depends wholly or in
part for education or support, or in whom he has a
pecuniary interest;
(c) Of any person under a legal obligation to him for
the payment of money, or respecting property or
services, of which death or illness might delay or
prevent the performance; and
(d) Of any person upon whose life any estate or
interest vested in him depends.
Sec. 11. The insured shall have the right to change
the beneficiary he designated in the policy, unless he
has expressly waived this right in said policy.
Sec. 12. The interest of a beneficiary in a life
insurance policy shall be forfeited when the
beneficiary is the principal, accomplice, or accessory
in willfully bringing about the death of the insured; in
which event, the nearest relative of the insured shall
receive the proceeds of said insurance if not
otherwise disqualified.
Sec. 13. Every interest in property, whether real or
personal, or any relation thereto, or liability in respect
thereof, of such nature that a contemplated peril
might directly damnify the insured, is an insurable
interest.
Sec. 14. An insurable interest in property may consist
in:chanroblesvirtuallawlibrary
(a) An existing interest;
(b) An inchoate interest founded on an existing
interest; or
(c) An expectancy, coupled with an existing interest in
that out of which the expectancy arises.
Sec. 15. A carrier or depository of any kind has an
insurable interest in a thing held by him as such, to
the extent of his liability but not to exceed the value
thereof.
Sec. 16. A mere contingent or expectant interest in
anything, not founded on an actual right to the thing,
nor upon any valid contract for it, is not insurable.
Sec. 17. The measure of an insurable interest in
property is the extent to which the insured might be
damnified by loss or injury thereof.
Sec. 18. No contract or policy of insurance on
property shall be enforceable except for the benefit of
some person having an insurable interest in the
property insured.
Sec. 19. An interest in property insured must exist
when the insurance takes effect, and when the loss
occurs, but not exist in the meantime; and interest in
the life or health of a person insured must exist when
the insurance takes effect, but need not exist
thereafter or when the loss occurs.
Sec. 20. Except in the cases specified in the next four
sections, and in the cases of life, accident, and health
insurance, a change of interest in any part of a thing
insured unaccompanied by a corresponding change in
interest in the insurance, suspends the insurance to
an equivalent extent, until the interest in the thing
and the interest in the insurance are vested in the
same person.
Sec. 21. A change in interest in a thing insured, after
the occurrence of an injury which results in a loss,
does not affect the right of the insured to indemnity
for the loss.
Sec. 22. A change of interest in one or more several
distinct things, separately insured by one policy, does
not avoid the insurance as to the others.
Sec. 23. A change on interest, by will or succession,
on the death of the insured, does not avoid an
insurance; and his interest in the insurance passes to
the person taking his interest in the thing insured.
Sec. 24. A transfer of interest by one of several
partners, joint owners, or owners in common, who
are jointly insured, to the others, does not avoid an
insurance even though it has been agreed that the
insurance shall cease upon an alienation of the thing
insured.
Sec. 25. Every stipulation in a policy of insurance for
the payment of loss whether the person insured has
or has not any interest in the property insured, or
that the policy shall be received as proof of such
interest, and every policy executed by way of gaming
or wagering, is void.
Title 4
CONCEALMENT
Sec. 26. A neglect to communicate that which a party
knows and ought to communicate, is called a
concealment.
Sec. 27. A concealment whether intentional or
unintentional entitles the injured party to rescind a
contract of insurance. (As amended by Batasang
Pambansa Blg. 874)
Sec. 28. Each party to a contract of insurance must
communicated to the other, in good faith, all facts
within his knowledge which are material to the
contract and as to which he makes no warranty, and
which the other has not the means of ascertaining.
Sec. 29. An intentional and fraudulent omission, on
the part of one insured, to communicate information
of matters proving or tending to prove the falsity of a
warranty, entitles the insurer to rescind.
Sec. 30. Neither party to a contract of insurance is
bound to communicate information of the matters
following, except in answer to the inquiries of the
other:chanroblesvirtuallawlibrary
(a) Those which the other knows;
(b) Those which, in the exercise of ordinary care, the
other ought to know, and of which the former has no
reason to suppose him ignorant;
(c) Those of which the other waives communication;
(d) Those which prove or tend to prove the existence
of a risk excluded by a warranty, and which are not
otherwise material; and
(e) Those which relate to a risk excepted from the
policy and which are not otherwise material.
Sec. 31. Materiality is to be determined not by the
event, but solely by the probable and reasonable
influence of the facts upon the party to whom the
communication is due, in forming his estimate of the
disadvantages of the proposed contract, or in making
his inquiries.
Sec. 32. Each party to a contract of insurance is
bound to know all the general causes which are open
to his inquiry, equally with that of the other, and
which may affect the political or material perils
contemplated; and all general usages of trade.
Sec. 33. The right to information of material facts
may be waived, either by the terms of the insurance
or by neglect to make inquiry as to such facts, where
they are distinctly implied in other facts of which
information is communicated.
Sec. 34. Information of the nature or amount of the
interest of one insured need not be communicated
unless in answer to an inquiry, except as prescribed
by section fifty-one.
Sec. 35. Neither party to a contract of insurance is
bound to communicate, even upon inquiry,
information of his own judgment upon the matters in
question.
Title 5
REPRESENTATION
Sec. 36. A representation may be oral or written.
Sec. 37. A representation may be made at the time
of, or before, issuance of the policy.
Sec. 38. The language of a representation is to be
interpreted by the same rules as the language of
contracts in general.
Sec. 39. A representation as to the future is to be
deemed a promise, unless it appears that it was
merely a statement of belief or expectation.
Sec. 40. A representation cannot qualify an express
provision in a contract of insurance, but it may qualify
an implied warranty.
Sec. 41. A representation may be altered or
withdrawn before the insurance is effected, but not
afterwards.
Sec. 42. A representation must be presumed to refer
to the date on which the contract goes into effect.
Sec. 43. When a person insured has no personal
knowledge of a fact, he may nevertheless repeat
information which he has upon the subject, and which
he believes to be true, with the explanation that he
does so on the information of others; or he may
submit the information, in its whole extent, to the
insurer; and in neither case is he responsible for its
truth, unless it proceeds from an agent of the
insured, whose duty it is to give the information.
Sec. 44. A representation is to be deemed false when
the facts fail to correspond with its assertions or
stipulations.
Sec. 45. If a representation is false in a material
point, whether affirmative or promissory, the injured
party is entitled to rescind the contract from the time
when the representation becomes false. The right to
rescind granted by this Code to the insurer is waived
by the acceptance of premium payments despite
knowledge of the ground for rescission. (As amended
by Batasang Pambansa Blg. 874).
Sec. 46. The materiality of a representation is
determined by the same rules as the materiality of a
concealment.
Sec. 47. The provisions of this chapter apply as well
to a modification of a contract of insurance as to its
original formation.
Sec. 48. Whenever a right to rescind a contract of
insurance is given to the insurer by any provision of
this chapter, such right must be exercised previous to
the commencement of an action on the contract.
After a policy of life insurance made payable on the
death of the insured shall have been in force during
the lifetime of the insured for a period of two years
from the date of its issue or of its last reinstatement,
the insurer cannot prove that the policy is void ab
initio or is rescindible by reason of the fraudulent
concealment or misrepresentation of the insured or
his agent.
Title 6
THE POLICY
Sec. 49. The written instrument in which a contract of
insurance is set forth, is called a policy of insurance.
Sec. 50. The policy shall be in printed form which may
contain blank spaces; and any word, phrase, clause,
mark, sign, symbol, signature, number, or word
necessary to complete the contract of insurance shall
be written on the blank spaces provided therein.
Any rider, clause, warranty or endorsement
purporting to be part of the contract of insurance and
which is pasted or attached to said policy is not
binding on the insured, unless the descriptive title or
name of the rider, clause, warranty or endorsement is
also mentioned and written on the blank spaces
provided in the policy.
Unless applied for by the insured or owner, any rider,
clause, warranty or endorsement issued after the
original policy shall be countersigned by the insured
or owner, which countersignature shall be taken as
his agreement to the contents of such rider, clause,
warranty or endorsement.
Group insurance and group annuity policies, however,
may be typewritten and need not be in printed form.
Sec. 51. A policy of insurance must
specify:chanroblesvirtuallawlibrary
(a) The parties between whom the contract is made;
(b) The amount to be insured except in the cases of
open or running policies;
(c) The premium, or if the insurance is of a character
where the exact premium is only determinable upon
the termination of the contract, a statement of the
basis and rates upon which the final premium is to be
determined;
(d) The property or life insured;
(e) The interest of the insured in property insured, if
he is not the absolute owner thereof;
(f) The risks insured against; and
(g) The period during which the insurance is to
continue.
Sec. 52. Cover notes may be issued to bind insurance
temporarily pending the issuance of the policy.
Within sixty days after the issue of the cover note, a
policy shall be issued in lieu thereof, including within
its terms the identical insurance bound under the
cover note and the premium therefor. chanrobles
virtual law library
Cover notes may be extended or renewed beyond
such sixty days with the written approval of the
Commissioner if he determines that such extension is
not contrary to and is not for the purpose of violating
any provisions of this Code. The Commissioner may
promulgate rules and regulations governing such
extensions for the purpose of preventing such
violations and may by such rules and regulations
dispense with the requirement of written approval by
him in the case of extension in compliance with such
rules and regulations.
Sec. 53. The insurance proceeds shall be applied
exclusively to the proper interest of the person in
whose name or for whose benefit it is made unless
otherwise specified in the policy.
Sec. 54. When an insurance contract is executed with
an agent or trustee as the insured, the fact that his
principal or beneficiary is the real party in interest
may be indicated by describing the insured as agent
or trustee, or by other general words in the policy.
Sec. 55. To render an insurance effected by one
partner or part-owner, applicable to the interest of his
co-partners or other part-owners, it is necessary that
the terms of the policy should be such as are
applicable to the joint or common interest.
Sec. 56. When the description of the insured in a
policy is so general that it may comprehend any
person or any class of persons, only he who can show
that it was intended to include him can claim the
benefit of the policy.
Sec. 57. A policy may be so framed that it will inure
to the benefit of whomsoever, during the continuance
of the risk, may become the owner of the interest
insured.
Sec. 58. The mere transfer of a thing insured does
not transfer the policy, but suspends it until the same
person becomes the owner of both the policy and the
thing insured.
Sec. 59. A policy is either open, valued or running.
Sec. 60. An open policy is one in which the value of
the thing insured is not agreed upon, but is left to be
ascertained in case of loss.
Sec. 61. A valued policy is one which expresses on its
face an agreement that the thing insured shall be
valued at a specific sum.
Sec. 62. A running policy is one which contemplates
successive insurances, and which provides that the
object of the policy may be from time to time defined,
especially as to the subjects of insurance, by
additional statements or indorsements.
Sec. 63. A condition, stipulation, or agreement in any
policy of insurance, limiting the time for commencing
an action thereunder to a period of less than one year
from the time when the cause of action accrues, is
void.
Sec. 64. No policy of insurance other than life shall be
cancelled by the insurer except upon prior notice
thereof to the insured, and no notice of cancellation
shall be effective unless it is based on the occurrence,
after the effective date of the policy, of one or more
of the following:chanroblesvirtuallawlibrary
(a) non-payment of premium;
(b) conviction of a crime arising out of acts increasing
the hazard insured against;
(c) discovery of fraud or material misrepresentation;
(d) discovery of willful or reckless acts or omissions
increasing the hazard insured against;
(e) physical changes in the property insured which
result in the property becoming uninsurable; or
(f) a determination by the Commissioner that the
continuation of the policy would violate or would
place the insurer in violation of this Code.
Sec. 65. All notices of cancellation mentioned in the
preceding section shall be in writing, mailed or
delivered to the named insured at the address shown
in the policy, and shall state (a) which of the grounds
set forth in section sixty-four is relied upon and (b)
that, upon written request of the named insured, the
insurer will furnish the facts on which the cancellation
is based.
Sec. 66. In case of insurance other than life, unless
the insurer at least forty-five days in advance of the
end of the policy period mails or delivers to the
named insured at the address shown in the policy
notice of its intention not to renew the policy or to
condition its renewal upon reduction of limits or
elimination of coverages, the named insured shall be
entitled to renew the policy upon payment of the
premium due on the effective date of the renewal.
Any policy written for a term of less than one year
shall be considered as if written for a term of one
year. Any policy written for a term longer than one
year or any policy with no fixed expiration date shall
be considered as if written for successive policy
periods or terms of one year.
Title 7
WARRANTIES
Sec. 67. A warranty is either expressed or implied.
Sec. 68. A warranty may relate to the past, the
present, the future, or to any or all of these.
Sec. 69. No particular form of words is necessary to
create a warranty.
Sec. 70. Without prejudice to section fifty-one, every
express warranty, made at or before the execution of
a policy, must be contained in the policy itself, or in
another instrument signed by the insured and
referred to in the policy as making a part of it.
Sec. 71. A statement in a policy of matter relating to
the person or thing insured, or to the risk, as a fact, is
an express warranty thereof.
Sec. 72. A statement in a policy which imparts that it
is intended to do or not to do a thing which materially
affects the risk, is a warranty that such act or
omission shall take place.
Sec. 73. When, before the time arrives for the
performance of a warranty relating to the future, a
loss insured against happens, or performance
becomes unlawful at the place of the contract, or
impossible, the omission to fulfill the warranty does
not avoid the policy.
Sec. 74. The violation of a material warranty, or other
material provision of a policy, on the part of either
party thereto, entitles the other to rescind.
Sec. 75. A policy may declare that a violation of
specified provisions thereof shall avoid it, otherwise
the breach of an immaterial provision does not avoid
the policy.
Sec. 76. A breach of warranty without fraud merely
exonerates an insurer from the time that it occurs, or
where it is broken in its inception, prevents the policy
from attaching to the risk.
Title 8
PREMIUM
Sec. 77. An insurer is entitled to payment of the
premium as soon as the thing insured is exposed to
the peril insured against. Notwithstanding any
agreement to the contrary, no policy or contract of
insurance issued by an insurance company is valid
and binding unless and until the premium thereof has
been paid, except in the case of a life or an industrial
life policy whenever the grace period provision
applies.
Sec. 78. An acknowledgment in a policy or contract of
insurance or the receipt of premium is conclusive
evidence of its payment, so far as to make the policy
binding, notwithstanding any stipulation therein that it
shall not be binding until the premium is actually paid.
Sec. 79. A person insured is entitled to a return of
premium, as follows:chanroblesvirtuallawlibrary
(a) To the whole premium if no part of his interest in
the thing insured be exposed to any of the perils
insured against;
(b) Where the insurance is made for a definite period
of time and the insured surrenders his policy, to such
portion of the premium as corresponds with the
unexpired time, at a pro rata rate, unless a short
period rate has been agreed upon and appears on the
face of the policy, after deducting from the whole
premium any claim for loss or damage under the
policy which has previously accrued; Provided, That
no holder of a life insurance policy may avail himself
of the privileges of this paragraph without sufficient
cause as otherwise provided by law.
Sec. 80. If a peril insured against has existed, and the
insurer has been liable for any period, however short,
the insured is not entitled to return of premiums, so
far as that particular risk is concerned.
Sec. 81. A person insured is entitled to return of the
premium when the contract is voidable, on account of
fraud or misrepresentation of the insurer, or of his
agent, or on account of facts, the existence of which
the insured was ignorant without his fault; or when
by any default of the insured other than actual fraud,
the insurer never incurred any liability under the
policy.
Sec. 82. In case of an over-insurance by several
insurers, the insured is entitled to a ratable return of
the premium, proportioned to the amount by which
the aggregate sum insured in all the policies exceeds
the insurable value of the thing at risk.
Title 9
LOSS
Sec. 83. An agreement not to transfer the claim of the
insured against the insurer after the loss has
happened, is void if made before the loss except as
otherwise provided in the case of life insurance.
Sec. 84. Unless otherwise provided by the policy, an
insurer is liable for a loss of which a peril insured
against was the proximate cause, although a peril not
contemplated by the contract may have been a
remote cause of the loss; but he is not liable for a
loss which the peril insured against was only a remote
cause.
Sec. 85. An insurer is liable where the thing insured is
rescued from a peril insured against that would
otherwise have caused a loss, if, in the course of such
rescue, the thing is exposed to a peril not insured
against, which permanently deprives the insured of its
possession, in whole or in part; or where a loss is
caused by efforts to rescue the thing insured from a
peril insured against.
Sec. 86. Where a peril is especially excepted in a
contract of insurance, a loss, which would not have
occurred but for such peril, is thereby excepted
although the immediate cause of the loss was a peril
which was not excepted.
Sec. 87. An insurer is not liable for a loss caused by
the willful act or through the connivance of the
insured; but he is not exonerated by the negligence
of the insured, or of the insurance agents or others.
Title 10
NOTICE OF LOSS
Sec. 88. In case of loss upon an insurance against
fire, an insurer is exonerated, if notice thereof be not
given to him by an insured, or some person entitled
to the benefit of the insurance, without unnecessary
delay.
Sec. 89. When a preliminary proof of loss is required
by a policy, the insured is not bound to give such
proof as would be necessary in a court of justice; but
it is sufficient for him to give the best evidence which
he has in his power at the time.
Sec. 90. All defects in a notice of loss, or in
preliminary proof thereof, which the insured might
remedy, and which the insurer omits to specify to
him, without unnecessary delay, as grounds of
objection, are waived.
Sec. 91. Delay in the presentation to an insurer of
notice or proof of loss is waived if caused by any act
of him, or if he omits to take objection promptly and
specifically upon that ground.
Sec. 92. If the policy requires, by way of preliminary
proof of loss, the certificate or testimony of a person
other than the insured, it is sufficient for the insured
to use reasonable diligence to procure it, and in case
of the refusal of such person to give it, then to furnish
reasonable evidence to the insurer that such refusal
was not induced by any just grounds of disbelief in
the facts necessary to be certified or testified.
Title 11
DOUBLE INSURANCE
Sec. 93. A double insurance exists where the same
person is insured by several insurers separately in
respect to the same subject and interest.
Sec. 94. Where the insured is overinsured by double
insurance:chanroblesvirtuallawlibrary
(a) The insured, unless the policy otherwise provides,
may claim payment from the insurers in such order as
he may select, up to the amount for which the
insurers are severally liable under their respective
contracts;
(b) Where the policy under which the insured claims
is a valued policy, the insured must give credit as
against the valuation for any sum received by him
under any other policy without regard to the actual
value of the subject matter insured;
(c) Where the policy under which the insured claims is
an unvalued policy he must give credit, as against the
full insurable value, for any sum received by him
under any policy;
(d) Where the insured receives any sum in excess of
the valuation in the case of valued policies, or of the
insurable value in the case of unvalued policies, he
must hold such sum in trust for the insurers,
according to their right of contribution among
themselves;
(e) Each insurer is bound, as between himself and the
other insurers, to contribute ratably to the loss in
proportion to the amount for which he is liable under
his contract.
Title 12
REINSURANCE
Sec. 95. A contract of reinsurance is one by which an
insurer procures a third person to insure him against
loss or liability by reason of such original insurance.
Sec. 96. Where an insurer obtains reinsurance, except
under automatic reinsurance treaties, he must
communicate all the representations of the original
insured, and also all the knowledge and information
he possesses, whether previously or subsequently
acquired, which are material to the risk.
Sec. 97. A reinsurance is presumed to be a contract
of indemnity against liability, and not merely against
damage.
Sec. 98. The original insured has no interest in a
contract of reinsurance.
Chapter II
CLASSES OF INSURANCE
Title I
MARINE INSURANCE
Sub-Title 1- A
DEFINITION
Sec. 99. Marine Insurance
includes:chanroblesvirtuallawlibrary
(1) Insurance against loss of or damage
to:chanroblesvirtuallawlibrary
(a) Vessels, craft, aircraft, vehicles, goods, freights,
cargoes, merchandise, effects, disbursements, profits,
moneys, securities, choses in action, evidences of
debts, valuable papers, bottomry, and respondentia
interests and all other kinds of property and interests
therein, in respect to, appertaining to or in connection
with any and all risks or perils of navigation, transit or
transportation, or while being assembled, packed,
crated, baled, compressed or similarly prepared for
shipment or while awaiting shipment, or during any
delays, storage, transhipment, or reshipment incident
thereto, including war risks, marine builder's risks,
and all personal property floater risks;
(b) Person or property in connection with or
appertaining to a marine, inland marine, transit or
transportation insurance, including liability for loss of
or damage arising out of or in connection with the
construction, repair, operation, maintenance or use of
the subject matter of such insurance (but not
including life insurance or surety bonds nor insurance
against loss by reason of bodily injury to any person
arising out of ownership, maintenance, or use of
automobiles);
(c) Precious stones, jewels, jewelry, precious metals,
whether in course of transportation or otherwise;
(d) Bridges, tunnels and other instrumentalities of
transportation and communication (excluding
buildings, their furniture and furnishings, fixed
contents and supplies held in storage); piers,
wharves, docks and slips, and other aids to navigation
and transportation, including dry docks and marine
railways, dams and appurtenant facilities for the
control of waterways.
(2) "Marine protection and indemnity
insurance," meaning insurance against, or against
legal liability of the insured for loss, damage, or
expense incident to ownership, operation, chartering,
maintenance, use, repair, or construction of any
vessel, craft or instrumentality in use of ocean or
inland waterways, including liability of the insured for
personal injury, illness or death or for loss of or
damage to the property of another person.
Sub-Title 1-B
INSURABLE INTEREST
Sec. 100. The owner of a ship has in all cases an
insurable interest in it, even when it has been
chartered by one who covenants to pay him its value
in case of loss: Provided, That in this case the insurer
shall be liable for only that part of the loss which the
insured cannot recover from the charterer.
Sec. 101. The insurable interest of the owner of the
ship hypothecated by bottomry is only the excess of
its value over the amount secured by bottomry.
Sec. 102. Freightage, in the sense of a policy of
marine insurance, signifies all the benefits derived by
the owner, either from the chartering of the ship or
its employment for the carriage of his own goods or
those of others.
Sec. 103. The owner of a ship has an insurable
interest in expected freightage which according to the
ordinary and probable course of things he would have
earned but for the intervention of a peril insured
against or other peril incident to the voyage.
Sec. 104. The interest mentioned in the last section
exists, in case of a charter party, when the ship has
broken ground on the chartered voyage. If a price is
to be paid for the carriage of goods it exists when
they are actually on board, or there is some contract
for putting them on board, and both ship and goods
are ready for the specified voyage.
Sec. 105. One who has an interest in the thing from
which profits are expected to proceed has an
insurable interest in the profits.
Sec. 106. The charterer of a ship has an insurable
interest in it, to the extent that he is liable to be
damnified by its loss.
Sub-Title 1-C
CONCEALMENT
Sec. 107. In marine insurance each party is bound to
communicate, in addition to what is required by
section twenty-eight, all the information which he
possesses, material to the risk, except such as is
mentioned in Section thirty, and to state the exact
and whole truth in relation to all matters that he
represents, or upon inquiry discloses or assumes to
disclose.
Sec. 108. In marine insurance, information of the
belief or expectation of a third person, in reference to
a material fact, is material.
Sec. 109. A person insured by a contract of marine
insurance is presumed to have knowledge, at the time
of insuring, of a prior loss, if the information might
possibly have reached him in the usual mode of
transmission and at the usual rate of communication.
Sec. 110. A concealment in a marine insurance, in
respect to any of the following matters, does not
vitiate the entire contract, but merely exonerates the
insurer from a loss resulting from the risk
concealed:chanroblesvirtuallawlibrary
(a) The national character of the insured;
(b) The liability of the thing insured to capture and
detention;
(c) The liability to seizure from breach of foreign laws
of trade;
(d) The want of necessary documents;
(e) The use of false and simulated papers.
Sub-Title 1-D
REPRESENTATION
Sec. 111. If a representation by a person insured by a
contract of marine insurance, is intentionally false in
any material respect, or in respect of any fact on
which the character and nature of the risk depends,
the insurer may rescind the entire contract.
Sec. 112. The eventual falsity of a representation as
to expectation does not, in the absence of fraud,
avoid a contract of marine insurance.
Sub-Title 1-E
IMPLIED WARRANTIES
Sec. 113. In every marine insurance upon a ship or
freight, or freightage, or upon any thing which is the
subject of marine insurance, a warranty is implied
that the ship is seaworthy.
Sec. 114. A ship is seaworthy when reasonably fit to
perform the service and to encounter the ordinary
perils of the voyage contemplated by the parties to
the policy.
Sec. 115. An implied warranty of seaworthiness is
complied with if the ship be seaworthy at the time of
the of commencement of the risk, except in the
following cases:chanroblesvirtuallawlibrary
(a) When the insurance is made for a specified length
of time, the implied warranty is not complied with
unless the ship be seaworthy at the commencement
of every voyage it undertakes during that time;
(b) When the insurance is upon the cargo which, by
the terms of the policy, description of the voyage, or
established custom of the trade, is to be transhipped
at an intermediate port, the implied warranty is not
complied with unless each vessel upon which the
cargo is shipped, or transhipped, be seaworthy at the
commencement of each particular voyage.
Sec. 116. A warranty of seaworthiness extends not
only to the condition of the structure of the ship itself,
but requires that it be properly laden, and provided
with a competent master, a sufficient number of
competent officers and seamen, and the requisite
appurtenances and equipment, such as ballasts,
cables and anchors, cordage and sails, food, water,
fuel and lights, and other necessary or proper stores
and implements for the voyage.
Sec. 117. Where different portions of the voyage
contemplated by a policy differ in respect to the
things requisite to make the ship seaworthy therefor,
a warranty of seaworthiness is complied with if, at the
commencement of each portion, the ship is seaworthy
with reference to that portion.
Sec. 118. When the ship becomes unseaworthy
during the voyage to which an insurance relates, an
unreasonable delay in repairing the defect exonerates
the insurer on ship or shipowner's interest from
liability from any loss arising therefrom.
Sec. 119. A ship which is seaworthy for the purpose
of an insurance upon the ship may, nevertheless, by
reason of being unfitted to receive the cargo, be
unseaworthy for the purpose of the insurance upon
the cargo.
Sec. 120. Where the nationality or neutrality of a ship
or cargo is expressly warranted, it is implied that the
ship will carry the requisite documents to show such
nationality or neutrality and that it will not carry any
documents which cast reasonable suspicion thereon.
Sub-Title 1-F
THE VOYAGE AND DEVIATION
Sec. 121. When the voyage contemplated by a marine
insurance policy is described by the places of
beginning and ending, the voyage insured in one
which conforms to the course of sailing fixed by
mercantile usage between those places.
Sec. 122. If the course of sailing is not fixed by
mercantile usage, the voyage insured by a marine
insurance policy is that way between the places
specified, which to a master of ordinary skill and
discretion, would mean the most natural, direct and
advantageous.
Sec. 123. Deviation is a departure from the course of
the voyage insured, mentioned in the last two
sections, or an unreasonable delay in pursuing the
voyage or the commencement of an entirely different
voyage.
Sec. 124. A deviation is
proper:chanroblesvirtuallawlibrary
(a) When caused by circumstances over which neither
the master nor the owner of the ship has any control;
(b) When necessary to comply with a warranty, or to
avoid a peril, whether or not the peril is insured
against;
(c) When made in good faith, and upon reasonable
grounds of belief in its necessity to avoid a peril; or
(d) When made in good faith, for the purpose of
saving human life or relieving another vessel in
distress.
Sec. 125. Every deviation not specified in the last
section is improper.
Sec. 126. An insurer is not liable for any loss
happening to the thing insured subsequent to an
improper deviation.
Sub-Title 1-G
LOSS
Sec. 127. A loss may be either total or partial.
Sec. 128. Every loss which is not total is partial.
Sec. 129. A total loss may be either actual or
constructive.
Sec. 130. An actual total loss is cause
by:chanroblesvirtuallawlibrary
(a) A total destruction of the thing insured;
(b) The irretrievable loss of the thing by sinking, or by
being broken up;
(c) Any damage to the thing which renders it
valueless to the owner for the purpose for which he
held it; or
(d) Any other event which effectively deprives the
owner of the possession, at the port of destination, of
the thing insured.
Sec. 131. A constructive total loss is one which gives
to a person insured a right to abandon, under Section
one hundred thirty-nine.
Sec. 132. An actual loss may be presumed from the
continued absence of a ship without being heard of.
The length of time which is sufficient to raise this
presumption depends on the circumstances of the
case.
Sec. 133. When a ship is prevented, at an
intermediate port, from completing the voyage, by
the perils insured against, the liability of a marine
insurer on the cargo continues after they are thus
reshipped.
Nothing in this section shall prevent an insurer from
requiring an additional premium if the hazard be
increased by this extension of liability.
Sec. 134. In addition to the liability mentioned in the
last section, a marine insurer is bound for damages,
expenses of discharging, storage, reshipment, extra
freightage, and all other expenses incurred in saving
cargo reshipped pursuant to the last section, up to
the amount insured.
Nothing in this or in the preceding section shall
render a marine insurer liable for any amount in
excess of the insured value or, if there be none, of
the insurable value.
Sec. 135. Upon an actual total loss, a person insured
is entitled to payment without notice of
abandonment.
Sec. 136. Where it has been agreed that an insurance
upon a particular thing, or class of things, shall be
free from particular average, a marine insurer is not
liable for any particular average loss not depriving the
insured of the possession, at the port of destination,
of the whole of such thing, or class of things, even
though it becomes entirely worthless; but such
insurer is liable for his proportion of all general
average loss assessed upon the thing insured.
Sec. 137. An insurance confined in terms to an actual
loss does not cover a constructive total loss, but
covers any loss, which necessarily results in depriving
the insured of the possession, at the port of
destination, of the entire thing insured.
Sub-Title 1-H
ABANDONMENT
Sec. 138. Abandonment, in marine insurance, is the
act of the insured by which, after a constructive total
loss, he declares the relinquishment to the insurer of
his interest in the thing insured.
Sec. 139. A person insured by a contract of marine
insurance may abandon the thing insured, or any
particular portion thereof separately valued by the
policy, or otherwise separately insured, and recover
for a total loss thereof, when the cause of the loss is
a peril insured against:chanroblesvirtuallawlibrary
(a) If more than three-fourths thereof in value is
actually lost, or would have to be expended to
recover it from the peril;
(b) If it is injured to such an extent as to reduce its
value more than three-fourths;
(c) If the thing insured is a ship, and the
contemplated voyage cannot be lawfully performed
without incurring either an expense to the insured of
more than three-fourths the value of the thing
abandoned or a risk which a prudent man would not
take under the circumstances; or
(d) If the thing insured, being cargo or freightage,
and the voyage cannot be performed, nor another
ship procured by the master, within a reasonable time
and with reasonable diligence, to forward the cargo,
without incurring the like expense or risk mentioned
in the preceding sub-paragraph. But freightage
cannot in any case be abandoned unless the ship is
also abandoned.
Sec. 140. An abandonment must be neither partial
nor conditional.
Sec. 141. An abandonment must be made within a
reasonable time after receipt of reliable information of
the loss, but where the information is of a doubtful
character, the insured is entitled to a reasonable time
to make inquiry.
Sec. 142. Where the information upon which an
abandonment has been made proves incorrect, or the
thing insured was so far restored when the
abandonment was made that there was then in fact
no total loss, the abandonment becomes ineffectual.
Sec. 143. Abandonment is made by giving notice
thereof to the insurer, which may be done orally, or in
writing; Provided, That if the notice be done orally, a
written notice of such abandonment shall be
submitted within seven days from such oral notice.
Sec. 144. A notice of abandonment must be explicit,
and must specify the particular cause of the
abandonment, but need state only enough to show
that there is probable cause therefor, and need not
be accompanied with proof of interest or of loss.
Sec. 145. An abandonment can be sustained only
upon the cause specified in the notice thereof.
Sec. 146. An abandonment is equivalent to a transfer
by the insured of his interest to the insurer, with all
the chances of recovery and indemnity.
Sec. 147. If a marine insurer pays for a loss as if it
were an actual total loss, he is entitled to whatever
may remain of the thing insured, or its proceeds or
salvage, as if there had been a formal abandonment.
Sec. 148. Upon an abandonment, acts done in good
faith by those who were agents of the insured in
respect to the thing insured, subsequent to the loss,
are at the risk of the insurer and for his benefit.
Sec. 149. Where notice of abandonment is properly
given, the rights of the insured are not prejudiced by
the fact that the insurer refuses to accept the
abandonment.
Sec. 150. The acceptance of an abandonment may be
either express or implied from the conduct of the
insurer. The mere silence of the insurer for an
unreasonable length of time after notice shall be
construed as an acceptance.
Sec. 151. The acceptance of an abandonment,
whether express or implied, is conclusive upon the
parties, and admits the loss and the sufficiency of the
abandonment.
Sec. 152. An abandonment once made and accepted
is irrevocable, unless the ground upon which it was
made proves to be unfounded.
Sec. 153. On an accepted abandonment of a ship,
freightage earned previous to the loss belongs to the
insurer of said freightage; but freightage
subsequently earned belongs to the insurer of the
ship.
Sec. 154. If an insurer refuses to accept a valid
abandonment, he is liable as upon actual total loss,
deducting from the amount any proceeds of the thing
insured which may have come to the hands of the
insured.
Sec. 155. If a person insured omits to abandon, he
may nevertheless recover his actual loss.
Sub-Title 1-I
MEASURE OF INDEMNITY
Sec. 156. A valuation in a policy of marine insurance
in conclusive between the parties thereto in the
adjustment of either a partial or total loss, if the
insured has some interest at risk, and there is no
fraud on his part; except that when a thing has been
hypothecated by bottomry or respondentia, before its
insurance, and without the knowledge of the person
actually procuring the insurance, he may show the
real value. But a valuation fraudulent in fact, entitles
the insurer to rescind the contract.
Sec. 157. A marine insurer is liable upon a partial
loss, only for such proportion of the amount insured
by him as the loss bears to the value of the whole
interest of the insured in the property insured.
Sec. 158. Where profits are separately insured in a
contract of marine insurance, the insured is entitled to
recover, in case of loss, a proportion of such profits
equivalent to the proportion which the value of the
property lost bears to the value of the whole.
Sec. 159. In case of a valued policy of marine
insurance on freightage or cargo, if a part only of the
subject is exposed to the risk, the evaluation applies
only in proportion to such part.
Sec. 160. When profits are valued and insured by a
contract of marine insurance, a loss of them is
conclusively presumed from a loss of the property out
of which they are expected to arise, and the valuation
fixes their amount.
Sec. 161. In estimating a loss under an open policy of
marine insurance the following rules are to be
observed:chanroblesvirtuallawlibrary
(a) The value of a ship is its value at the beginning of
the risk, including all articles or charges which add to
its permanent value or which are necessary to
prepare it for the voyage insured;
(b) The value of the cargo is its actual cost to the
insured, when laden on board, or where the cost
cannot be ascertained, its market value at the time
and place of lading, adding the charges incurred in
purchasing and placing it on board, but without
reference to any loss incurred in raising money for its
purchase, or to any drawback on its exportation, or to
the fluctuation of the market at the port of
destination, or to expenses incurred on the way or on
arrival;
(c) The value of freightage is the gross freightage,
exclusive of primage, without reference to the cost of
earning it; and
(d) The cost of insurance is in each case to be added
to the value thus estimated.
Sec. 162. If cargo insured against partial loss arrives
at the port of destination in a damaged condition, the
loss of the insured is deemed to be the same
proportion of the value which the market price at that
port, of the thing so damaged, bears to the market
price it would have brought if sound.
Sec. 163. A marine insurer is liable for all the
expenses attendant upon a loss which forces the ship
into port to be repaired; and where it is stipulated in
the policy that the insured shall labor for the recovery
of the property, the insurer is liable for the expense
incurred thereby, such expense, in either case, being
in addition to a total loss, if that afterwards occurs.
Sec. 164. A marine insurer is liable for a loss falling
upon the insured, through a contribution in respect to
the thing insured, required to be made by him
towards a general average loss called for by a peril
insured against; provided, that the liability of the
insurer shall be limited to the proportion of
contribution attaching to his policy value where this is
less than the contributing value of the thing insured.
Sec. 165. When a person insured by a contract of
marine insurance has a demand against others for
contribution, he may claim the whole loss from the
insurer, subrogating him to his own right to
contribution. But no such claim can be made upon the
insurer after the separation of the interests liable to
the contribution, nor when the insured, having the
right and opportunity to enforce the contribution from
others, has neglected or waived the exercise of that
right.
Sec. 166. In the case of a partial loss of ship or its
equipment, the old materials are to be applied
towards payment for the new. Unless otherwise
stipulated in the policy, a marine insurer is liable for
only two-thirds of the remaining cost of repairs after
such deduction, except that anchors must be paid in
full.
Title 2
FIRE INSURANCE
Sec. 167. As used in this Code, the term "fire
insurance" shall include insurance against loss by fire,
lightning, windstorm, tornado or earthquake and
other allied risks, when such risks are covered by
extension to fire insurance policies or under separate
policies.
Sec. 168. An alteration in the use or condition of a
thing insured from that to which it is limited by the
policy made without the consent of the insurer, by
means within the control of the insured, and
increasing the risks, entitles an insurer to rescind a
contract of fire insurance.
Sec. 169. An alteration in the use or condition of a
thing insured from that to which it is limited by the
policy, which does not increase the risk, does not
affect a contract of fire insurance. chanrobles virtual
law library
Sec. 170. A contract of fire insurance is not affected
by any act of the insured subsequent to the execution
of the policy, which does not violate its provisions,
even though it increases the risk and is the cause of
the loss.
Sec. 171. If there is no valuation in the policy, the
measure of indemnity in an insurance against fire is
the expense it would be to the insured at the time of
the commencement of the fire to replace the thing
lost or injured in the condition in which at the time of
the injury; but if there is a valuation in a policy of fire
insurance, the effect shall be the same as in a policy
of marine insurance.
Sec. 172. Whenever the insured desires to have a
valuation named in his policy, insuring any building or
structure against fire, he may require such building or
structure to be examined by an independent
appraiser and the value of the insured's interest
therein may then be fixed as between the insurer and
the insured. The cost of such examination shall be
paid for by the insured. A clause shall be inserted in
such policy stating substantially that the value of the
insured's interest in such building or structure has
been thus fixed. In the absence of any change
increasing the risk without the consent of the insurer
or of fraud on the part of the insured, then in case of
a total loss under such policy, the whole amount so
insured upon the insured's interest in such building or
structure, as stated in the policy upon which the
insurers have received a premium, shall be paid, and
in case of a partial loss the full amount of the partial
loss shall be so paid, and in case there are two or
more policies covering the insured's interest therein,
each policy shall contribute pro rata to the payment
of such whole or partial loss. But in no case shall the
insurer be required to pay more than the amount thus
stated in such policy. This section shall not prevent
the parties from stipulating in such policies
concerning the repairing, rebuilding or replacing of
buildings or structures wholly or partially damaged or
destroyed.
Sec. 173. No policy of fire insurance shall be pledged,
hypothecated, or transferred to any person, firm or
company who acts as agent for or otherwise
represents the issuing company, and any such
pledge, hypothecation, or transfer hereafter made
shall be void and of no effect insofar as it may affect
other creditors of the insured.
Title 3
CASUALTY INSURANCE
Sec. 174. Casualty insurance is insurance covering
loss or liability arising from accident or mishap,
excluding certain types of loss which by law or
custom are considered as falling exclusively within the
scope of other types of insurance such as fire or
marine. It includes, but is not limited to, employer's
liability insurance, motor vehicle liability insurance,
plate glassinsurance, burglary and theft insurance,
personal accident and health insurance as written by
non-life insurance companies, and other substantially
similar kinds of insurance.
Title 4
SURETYSHIP
Sec. 175. A contract of suretyship is an agreement
whereby a party called the surety guarantees the
performance by another party called the principal or
obligor of an obligation or undertaking in favor of a
third party called the obligee. It includes official
recognizances, stipulations, bonds or undertakings
issued by any company by virtue of and under the
provisions of Act No. 536, as amended by Act No.
2206.
Sec. 176. The liability of the surety or sureties shall
be joint and several with the obligor and shall be
limited to the amount of the bond. It is determined
strictly by the terms of the contract of suretyship in
relation to the principal contract between the obligor
and the obligee.(As amended by Presidential Decree
No. 1455).
Sec. 177. The surety is entitled to payment of the
premium as soon as the contract of suretyship or
bond is perfected and delivered to the obligor. No
contract of suretyship or bonding shall be valid and
binding unless and until the premium therefor has
been paid, except where the obligee has accepted the
bond, in which case the bond becomes valid and
enforceable irrespective of whether or not the
premium has been paid by the obligor to the
surety: Provided, That if the contract of suretyship or
bond is not accepted by, or filed with the obligee, the
surety shall collect only reasonable amount, not
exceeding fifty per centum of the premium due
thereon as service fee plus the cost of stamps or
other taxes imposed for the issuance of the contract
or bond: Provided, however, That if the non-
acceptance of the bond be due to the fault or
negligence of the surety, no such service fee, stamps
or taxes shall be collected.
In the case of a continuing bond, the obligor shall pay
the subsequent annual premium as it falls due until
the contract of suretyship is cancelled by the obligee
or by the Commissioner or by a court of competent
jurisdiction, as the case may be. chanrobles virtual
law library
Sec. 178. Pertinent provisions of the Civil Code of the
Philippines shall be applied in a suppletory character
whenever necessary in interpreting the provisions of a
contract of suretyship.
Title 5
LIFE INSURANCE
Sec. 179. Life insurance is insurance on human lives
and insurance appertaining thereto or connected
therewith.
Sec. 180. An insurance upon life may be made
payable on the death of the person, or on his
surviving a specified period, or otherwise contingently
on the continuance or cessation of life.
Every contract or pledge for the payment of
endowments or annuities shall be considered a life
insurance contract for purpose of this Code.
In the absence of a judicial guardian, the father, or in
the latter's absence or incapacity, the mother, or any
minor, who is an insured or a beneficiary under a
contract of life, health or accident insurance, may
exercise, in behalf of said minor, any right under the
policy, without necessity of court authority or the
giving of a bond, where the interest of the minor in
the particular act involved does not exceed twenty
thousand pesos. Such right may include, but shall not
be limited to, obtaining a policy loan, surrendering the
policy, receiving the proceeds of the policy, and giving
the minor's consent to any transaction on the policy.
Sec. 180-A. The insurer in a life insurance contract
shall be liable in case of suicides only when it is
committed after the policy has been in force for a
period of two years from the date of its issue or of its
last reinstatement, unless the policy provides a
shorter period: Provided, however, That suicide
committed in the state of insanity shall be
compensable regardless of the date of
commission. (As amended by Batasang Pambansa
Blg. 874).
Sec. 181. A policy of insurance upon life or health
may pass by transfer, will or succession to any
person, whether he has an insurable interest or not,
and such person may recover upon it whatever the
insured might have recovered.
Sec. 182. Notice to an insurer of a transfer or bequest
thereof is not necessary to preserve the validity of a
policy of insurance upon life or health, unless thereby
expressly required.
Sec. 183. Unless the interest of a person insured is
susceptible of exact pecuniary measurement, the
measure of indemnity under a policy of insurance
upon life or health is the sum fixed in the policy.
Chapter III
THE BUSINESS OF INSURANCE
Title 1
INSURANCE COMPANIES, ORGANIZATION,
CAPITALIZATION AND AUTHORIZATION
Sec. 184. For purposes of this Code, the
term "insurer" or "insurance company" shall include
all individuals, partnerships, associations, or
corporations, including government-owned or
controlled corporations or entities, engaged as
principals in the insurance business, excepting mutual
benefit associations. Unless the context otherwise
requires, the terms shall also include professional
reinsurers defined in section two hundred
eighty. "Domestic company" shall include companies
formed, organized or existing under the laws of the
Philippines. "Foreign company" when used without
limitation shall include companies formed, organized,
or existing under any laws other than those of the
Philippines.
Sec. 185. Corporations formed or organized to save
any person or persons or other corporations harmless
from loss, damage, or liability arising from any
unknown or future or contingent event, or to
indemnify or to compensate any person or persons or
other corporations for any such loss, damage, or
liability, or to guarantee the performance of or
compliance with contractual obligations or the
payment of debt of others shall be known
as "insurance corporations".
The provisions of the Corporation Law shall apply to
all insurance corporations now or hereafter engaged
in business in the Philippines insofar as they do not
conflict with the provisions of this chapter.
Sec. 186. No person, partnership, or association of
persons shall transact any insurance business in the
Philippines except as agent of a person or corporation
authorized to do the business of insurance in the
Philippines, unless possessed of the capital and assets
required of an insurance corporation doing the same
kind of business in the Philippines and invested in the
same manner; nor unless the Commissioner shall
have granted to him or them a certificate to the effect
that he or they have complied with all the provisions
of law which an insurance corporation doing business
in the Philippines is required to observe.
Every person, partnership, or association receiving
any such certificate of authority shall be subject to
the insurance laws of the Philippines and to the
jurisdiction and supervision of the Commissioner in
the same manner as if an insurance corporation
authorized by the laws of the Philippines to engage in
the business of insurance specified in the certificate.
Sec. 187. No insurance company shall transact any
insurance business in the Philippines until after it shall
have obtained a certificate of authority for that
purpose from the Commissioner upon application
therefor and payment by the company concerned of
the fees hereinafter prescribed.
The Commissioner may refuse to issue a certificate of
authority to any insurance company if, in his
judgment, such refusal will best promote the interest
of the people of this country. No such certificate of
authority shall be granted to any such company until
the Commissioner shall have satisfied himself by such
examination as he may make and such evidence as
he may require that such company is qualified by the
laws of the Philippines to transact business therein,
that the grant of such authority appears to be
justified in the light of economic requirements, and
that the direction and administration, as well as the
integrity and responsibility of the organizers and
administrators, the financial organization and the
amount of capital, notwithstanding the provisions of
section one hundred eighty-eight, reasonably assure
the safety of the interests of the policyholders and the
public.
In order to maintain the quality of the management
of the insurance companies and afford better
protection to policyholders and the public in general,
any person of good moral character, unquestioned
integrity and recognized competence may be elected
or appointed director or officer of insurance
companies. The Commissioner shall prescribe the
qualifications of the executive officers and other key
officials of insurance companies for purposes of this
section.
No person shall concurrently be a director and/or
officer of an insurance company and an adjustment
company.
Incumbent directors and/or officers affected by the
above provisions are hereby allowed to hold on to
their positions until the end of their terms or two
years from the effectivity of this decree, whichever is
shorter.
Before issuing such certificate of authority, the
Commissioner must be satisfied that the name of the
company is not that of any other known company
transacting a similar business in the Philippines, or a
name so similar as to be calculated to mislead the
public.
Such certificate of authority shall expire on the last
day of June of each year and shall be renewed
annually if the company is continuing to comply with
the provisions of this Code or the circulars,
instructions, rulings or decisions of the
Commissioner. Every company receiving any such
certificates of authority shall be subject to the
provisions of this Code and other related laws and to
the jurisdiction and supervision of the Commissioner.
No insurance company may be authorized to transact
in the Philippines the business of life and non-life
insurance concurrently unless specifically authorized
to do so: Provided, That the terms "life" and "non-
life" insurance shall be deemed to include health,
accident and disability insurance.
No insurance company shall have equity in an
adjustment company and neither shall an adjustment
company have an equity in an insurance company.
Insurance companies and adjustment companies
presently affected by the above provision shall have
two years from the effectivity of this Decree within
which to divest of their stockholdings. (As amended
by Presidential Decree No. 1455).
Sec. 188. Except as provided in section two hundred
eighty-one, no domestic insurance company shall, in
a stock corporation, engage in business in the
Philippines unless possessed of a paid-up capital stock
equal to at least five million pesos: Provided, That a
domestic insurance company already doing business
in the Philippines with a paid-up capital stock which is
less than five million pesos shall have a paid-up
capital stock of at least three million pesos by
December thirty-one, nineteen hundred seventy-
eight, four million pesos by December thirty-one,
nineteen hundred seventy-nine and five million pesos
by December thirty-one, nineteen hundred
eighty: Provided, further, that the Secretary of
Finance may, upon recommendation of the Insurance
Commissioner, increase such minimum paid-up capital
stock requirement, under such terms and conditions
as he may impose, to an amount which, in his
opinion, would reasonably assure the safety of the
interests of the policyholders and the
public. chanrobles virtual law library
The Commissioner may, as a pre-licensing
requirement of a new insurance company, in addition
to the paid-up capital stock, require the stockholders
to pay in cash to the company in proportion to their
subscription interests a contributed surplus fund of
not less than one million pesos, in the case of a life
insurance company, or not less than five hundred
thousand pesos, in the case of an insurance company
other than life. He may also require such company to
submit to him a business plan showing the company's
estimated receipts and disbursements, as well as the
basis therefor, for the next succeeding three years.
If organized as a mutual company, in lieu of such
capital stock, it must have available cash assets of at
least five million pesos above all liabilities for losses
reported, expenses, taxes, legal reserve, and
reinsurance of all outstanding risks, and the
contributed surplus fund equal to the amounts
required of stock corporations. A stock insurance
company doing business in the Philippines may,
subject to the pertinent law and regulations which
now are of hereafter may be in force, alter its
organization and transform itself into a mutual
insurance company. (As amended by Presidential
Decree No. 1455).
Sec. 189. Every company must, before engaging in
the business of insurance in the Philippines, file with
the Commissioner the
following:chanroblesvirtuallawlibrary
(a) A certified copy of the last annual statement or a
verified financial statement exhibiting the condition
and affairs of such company;
(b) If incorporated under the laws of the Philippines,
a copy of the articles of incorporation and by-laws,
and any amendments to either, certified by the
Securities and Exchange Commission to be a copy of
that which is filed in its Office;
(c) If incorporated under any laws other than those of
the Philippines, a certificate from the Securities and
Exchange Commission showing that it is duly
registered in the mercantile registry of that
Commission in accordance with the Corporation Law.
A copy of the articles of incorporation and by-laws,
and any amendments to either, if organized or
formed under any law requiring such to be filed, duly
certified by the officer having the custody of same, or
if not so organized, a copy of the law, charter or deed
of settlement under which the deed of organization is
made, duly certified by the proper custodian thereof,
or proved by affidavit to be a copy; also, a certificate
under the hand and seal of the proper officer of such
state or country having supervision of insurance
business therein, if any there be, that such
corporation or company is organized under the laws
of such state or country, with the amount of capital
stock or assets and legal reserve required by this
Code;
(d) If not incorporated and of foreign domicile, aside
from the certificate mentioned in paragraph (c) of this
section, a certificate setting forth the nature and
character of the business, the location of the principal
office, the name of the individual or names of the
persons composing the partnership or association, the
amount of actual capital employed or to be employed
therein and the names of all officers and persons by
whom the business is or may be managed.
The certificate must be verified by the affidavit of the
chief officer, secretary, agent, or manager of the
company; and if there are any written articles of
agreement of the company, a copy thereof must be
accompany such certificate.
Sec. 190. The Commissioner must require as a
condition precedent to the transaction of insurance
business in the Philippines by any foreign insurance
company, that such company file in his office a
written power of attorney designating some person
who shall be a resident of the Philippines as its
general agent, on whom any notice provided by law
or by any insurance policy, proof of loss, summons
and other legal processes may be served in all actions
or other legal proceedings against such company, and
consenting that service upon such general agent shall
be admitted and held as valid as if served upon the
foreign company at its home office. Any such foreign
company shall, as further condition precedent to the
transaction of insurance business in the Philippines,
make and file with the Commissioner an agreement
or stipulation, executed by the proper authorities of
said company in form and substance as
follows:chanroblesvirtuallawlibrary
"The (name of company) does hereby stipulate and
agree in consideration of the permission granted by
the Insurance Commissioner to transact business in
the Philippines, that if at any time said company shall
leave the Philippines, or cease to transact business
therein, or shall be without any agent in the
Philippines on whom any notice, proof of loss,
summons, or legal process may be served, then in
any action or proceeding arising out any business or
transaction which occurred in the Philippines, service
of any notice provided by law, or insurance policy,
proof of loss, summons, or other legal process may
be made upon the Insurance Commissioner shall have
the same force and effect as if made upon the
company."
Whenever such service of notice, proof of loss,
summons, or other legal process shall be made upon
the Commission, he must, within ten days thereafter,
transmit by mail, postage paid, a copy of such notice,
proof of loss, summons, or other legal process to the
company at its home or principal office. The sending
of such copy by the Commissioner shall be a
necessary part of the service of the notice, proof of
loss, or other legal process.
Sec. 191. No insurance company organized or existing
under the government or laws other than those of the
Philippines shall engage in business in the Philippines
unless possessed of paid-up unimpaired capital or
assets and reserve not less than that herein required
of domestic insurance companies, nor until it shall
have deposited with the Commissioner for the benefit
and security of the policyholders and creditors of such
company in the Philippines, securities satisfactory to
the Commissioner consisting of good securities of the
Philippines, including new issues of stock
of "registered enterprises", as this term is defined in
Republic Act No. 5186, otherwise known as
theInvestment Incentives Act, as amended, to the
actual market value of not less than the minimum
paid-up capital required of domestic insurance
companies: Provided, That at least fifty per centum of
such securities shall consist of bonds or other
evidences of debt of the Government of the
Philippines, its political subdivisions and
instrumentalities, or of government-owned or
controlled corporations and entities, including the
Central Bank. The total investment of a foreign
insurance company in any registered enterprise shall
not exceed twenty per centum of the net worth of
said foreign insurance company nor twenty per
centum of the capital of the registered enterprise,
unless previously authorized in writing by the
Commissioner.
For purposes of this Code, the net worth of a foreign
insurance company shall refer only to its net worth in
the Philippines.
Sec. 192. The Commissioner shall hold the securities,
deposited as aforesaid, for the benefit and security of
all the policyholders of the company depositing the
same, but shall as long as the company is solvent,
permit the company to collect the interest or
dividends on the securities so deposited, and, from
time to time, with his assent, to withdraw any of such
securities, upon depositing with said Commissioner
other like securities, the market value of which shall
be equal to the market value of such as may be
withdrawn. In the event of any company ceasing to
do business in the Philippines the securities deposited
as aforesaid shall be returned upon the company's
making application therefor and proving to the
satisfaction of the Commissioner that it has no
further liability under any of its policies in the
Philippines.
Sec. 193. Every foreign company doing business in
the Philippines shall set aside an amount
corresponding to the legal reserves of the policies
written in the Philippines and invest and keep the
same therein in accordance with the provisions of this
section. The legal reserve therein required to be set
aside shall be invested only in the classes of the
Philippine securities described in section two
hundred: Provided, however, That no investment in
stocks or bonds of any single entity shall, in the
aggregate exceed twenty per centum of the net worth
of the investing company or twenty per centum of the
capital of the issuing company, whichever is the
lesser unless otherwise approved in writing by the
Commissioner. The securities purchased and kept in
the Philippines under this section, shall not be sent
out of the territorial jurisdiction of the Philippines
without the written consent of the Commissioner.
Title 2
MARGIN OF INSOLVENCY
Sec. 194. An insurance company doing business in
the Philippines shall at all times maintain a margin of
solvency which shall be an excess of the value of its
admitted assets exclusive of its paid-up capital, in the
case of a domestic company, or an excess of the
value of its admitted assets in the Philippines,
exclusive of its security deposits, in the case of a
foreign company, over the amount of its liabilities,
unearned premium and reinsurance reserves in the
Philippines of at least two per mille of the total
amount of its insurance in force as of the preceding
calendar year on all policies, except term insurance,
in the case of a life insurance company, or of at least
ten per centum of the total amount of its net
premium written during the preceding calendar year,
in the case of a company other than a life insurance
company: Provided, That in either case, such margin
shall in no event be less than five hundred thousand
pesos: and Provided, further, That the term "paid-up
capital"shall not include contributed surplus and
capital paid in excess of par value. Such assets,
liabilities and reserves shall exclude assets, liabilities
and reserves included in separate accounts
established in accordance with section two hundred
thirty-seven. Whenever the aforementioned margin
be found to be less than that herein required to be
maintained, the Commissioner shall forthwith direct
the company to make good any such deficiency by
cash, to be contributed by all stockholders of record
in proportion to their respective interest, and paid to
the treasurer of the company, within fifteen days
from receipt of the order: Provided, That the
company in the interim shall not be permitted to take
any new risk of any kind or character unless and until
it make good any such deficiency: Provided, further,
that a stockholder who aside from paying the
contribution due from him, pays the contribution due
from the another stockholder by reason of the failure
or refusal of the latter to do so, shall have a lien on
the certificates of stock of the insurance company
concerned appearing in its books in the name of the
defaulting stockholder on the date of default, as well
as on any interests or dividends that have accrued or
will accrue to the said certificates of stock, until the
corresponding payment or reimbursement is made by
the defaulting stockholder. (As amended by
Presidential Decree No. 1455).
Sec. 195. No domestic insurance corporation shall
declare or distribute any dividend on its outstanding
stocks except from profits attested in a sworn
statement to the Commissioner by the president or
treasurer of the corporation to be remaining on hand
after retaining unimpaired:chanroblesvirtuallawlibrary
(a) The entire paid-up capital stock;
(b) The margin of solvency required by section one
hundred ninety-four;
(c) In the case of life insurance corporation, the legal
reserve fund required by section two hundred eleven;
(d) In the case of corporations other than life, the
legal reserve fund required by section two hundred
thirteen;
(e) A sum sufficient to pay all net losses reported, or
in the course of settlement, and all liabilities for
expenses and taxes.
Any dividend declared or distributed under the
preceding paragraph shall be reported to the
Commissioner within thirty days after such declaration
or distribution.
If the Commissioner finds that any such corporation
has declared or distributed any such dividend in
violation of this section, he may order such
corporation to cease and desist from doing business
until the amount of such dividend or the portion
thereof in excess of the amount allowed under this
section has been restored to said corporation.
Title 3
ASSETS
Sec. 196. In any determination of the financial
condition of any insurance company doing business in
the Philippines, there shall be allowed and admitted
as assets only such assets owned by the insurance
company concerned and which consist
of:chanroblesvirtuallawlibrary
1. Cash in the possession of the insurance company
or in transit under its control, and the true and duly
verified balance of any deposit of such company in a
financially sound commercial bank or trust company.
2. Investments in securities, including money market
instruments, and in real property acquired or held in
accordance with and subject to the applicable
provisions of this Code and the income realized
therefrom or accrued thereon.
3. Loans granted by the insurance company
concerned to the extent of that portion thereof
adequately secured by non-speculative assets with
readily realizable values in accordance with and
subject to the limitations imposed by applicable
provisions of this Code.
4. Policy loans and other policy assets and liens on
policies, contracts or certificates of a life insurance
company, in an amount not exceeding legal reserves
and other policy liabilities carried on each individual
life insurance policy, contract or certificate.
5. The net amount of uncollected and deferred
premiums and annuity considerations in the case of a
life insurance company which carries the full mean
tabular reserve liability.
6. Reinsurance recoverable by the ceding
insurer:chanroblesvirtuallawlibrary
(a) from an insurer authorized to transact business in
this country, the full amount thereof; or
(b) from an insurer not authorized in this country, in
an amount not exceeding the liabilities carried by the
ceding insurer for amounts withheld under a
reinsurance treaty with such unauthorized insurer as
security for the payment of obligations thereunder if
such funds are held subject to withdrawal by, and
under the control of, the ceding insurer. The
Commissioner may prescribe the conditions under
which a ceding insurer may be allowed credit, as an
asset or as a deduction from loss and unearned
premium reserves, for reinsurance recoverable from
an insurer not authorized in this country but which
presents satisfactory evidence that it meets the
applicable standards of solvency required in this
country.
7. Funds withheld by a ceding insurer under a
reinsurance treaty, provided reserves for unpaid
losses and unearned premiums are adequately
provided.
8. Deposits or amounts recoverable from underwriting
associations, syndicates and reinsurance funds, or
from any suspended banking institution, to the extent
deemed by the Commissioner to be available for the
payment of losses and claims and values to be
determined by him.
9. Electronic data processing machines, as may be
authorized by the Commissioner to be acquired by the
insurance company concerned, the acquisition cost of
which to be amortized in equal annual amounts within
a period of five years from the date of acquisition
thereof.
10. Other assets, not inconsistent with the provisions
of paragraphs 1 to 9 hereof, which are deemed by
the Commissioner to be readily realizable and
available for the payment of losses and claims at
values to be determined by him.
Sec. 197. In addition to such assets as the
Commissioner may from time to time determine to be
non-admitted assets of insurance companies doing
business in the Philippines, the following assets shall
in no case be allowed as admitted assets of an
insurance company doing business in the Philippines,
in any determination of its financial
condition:chanroblesvirtuallawlibrary
1. Goodwill, trade names, and other like intangible
assets.
2. Prepaid or deferred charges for expenses and
commissions paid by such insurance company.
3. Advances to officers (other than policy loans),
which are not adequately secured and which are not
previously authorized by the Commissioner, as well as
advances to employees, agents, and other persons on
mere personal security.
4. Shares of stock of such insurance company, owned
by it, or any equity therein as well as loans secured
thereby, or any proportionate interest in such shares
of stock through the ownership by such insurance
company of an interest in another corporation or
business unit.
5. Furniture, furnishing, fixtures, safes, equipment,
library, stationery, literature, and supplies.
6. Items of bank credits representing checks, drafts or
notes returned unpaid after the date of statement.
7. The amount, if any, by which the aggregate value
of investments as carried in the ledger assets of such
insurance company exceeds the aggregate value
thereof as determined in accordance with the
provisions of this Code and/or the rules of the
Commissioner.
All non-admitted assets and all other assets of
doubtful value or character included as ledger or non-
ledger assets in any statement submitted by an
insurance company to the Commissioner, or in any
insurance examiner's report to him, shall also be
reported, to the extent of the value disallowed as
deductions from the gross assets of such insurance
company, except where the Commissioner permits a
reserve to be carried among the liabilities of such
insurance company in lieu of any such deduction.
Title 4
INVESTMENTS
Sec. 198. No insurance company shall loan any of its
money or deposits to any person, corporation or
association, except upon first mortgage or deeds of
trust of unencumbered, improved or unimproved real
estate, including condominiums, in cities and centers
of population of municipalities in the Philippines when
the amount of such loan is not in excess of seventy
per centum of the market value of such real estate;
or upon the security of first mortgages or deeds of
trust of actually cultivated, improved and
unencumbered agricultural lands in the Philippines
when the amount of such loan is not in excess of
forty per centum of the market value of such land; or
upon the purchase money mortgages or like securities
received by it upon the sale or exchange of real
property acquired pursuant to sections two hundred
and two hundred two; or upon bonds or other
evidences of debt of the Government of the
Philippines or its political subdivisions authorized by
law to issue bonds, or upon bonds or other evidences
of debt of government-owned or controlled
corporations and instrumentalities including the
Central Bank or upon obligations issued or
guaranteed by the International Bank for
Reconstruction and Development; or upon stocks,
bonds or other evidences of debt as are specified in
section two hundred.
A life insurance company, however, may lend to any
of its policyholders upon the security of the value of
its policy such sum as may be determined pursuant to
the provisions of the policy.
Loans granted upon the security of real estate for a
period longer than five years shall be amortized in
monthly, quarterly, semi-annual or annual
installments; Provided, That no such loans shall have
a maturity in excess of twenty years.
The phrase "improved real estate" used above is
hereby defined to mean land with permanent building
or buildings erected or being erected thereon. Except
as otherwise approved by the Commissioner, in case
the building or buildings on land do not belong to the
owner of the latter, no loan shall be granted on the
security of the real estate in question unless both the
owner of the building or buildings and the owner of
the land sign the deed of mortgage, and unless the
owner of the land is the Government of the
Philippines or one of its political subdivisions, in which
event the owner is not required to sign the deed of
mortgage.
Sec. 199. No loan by any insurance company on the
security of real estate shall be made unless the title to
such real estate shall have first been registered in
accordance with the existing Land Registration Act, or
shall be a titulo real duly registered, or have been
previously registered under the provisions of the
existing Mortgage Law.
Sec. 200. (1) An insurance company may purchase,
hold, own and convey such property, real and
personal, as may have been mortgaged, pledged, or
conveyed to it in good faith in trust for its benefit by
reason of money loaned by it in pursuance of the
regular business of the company, and such real or
personal property as may have been purchased by it
at sales under pledges, mortgages or deeds of trust
for its benefit on account of money loaned by it; and
such real and personal property as may have been
conveyed to it by borrowers in satisfaction and
discharge of loans made by the company to
them: Provided, however, That any real estate
purchased by an insurance company in payment or by
reason of any loan made by it shall be sold by the
company within twenty years after the title thereto
has been vested in it.
(2) An insurance company may purchase, hold, own
and convey real and personal property as
follows:chanroblesvirtuallawlibrary
(a) The lot with building thereon in which the
company conducts and carries on its business.
(b) Bonds or other evidences of debt of the
Government of the Philippines or its political
subdivisions authorized by law to issue bonds at the
reasonable market value thereof.
(c) Bonds or other evidences of debt of the
government-owned or controlled corporations and
entities, including the Central Bank.
(d) Bonds, debentures or other evidences of
indebtedness of any solvent corporations or institution
created or existing under the laws of the
Philippines: Provided, however, That the issuing,
assuming or guaranteeing entity or its predecessors
shall not have defaulted in the payment of interest on
any of its securities and that during each of any three
including the last two of the five fiscal years next
preceding the date of acquisition by such insurance
company of such bonds, debentures, or other
evidences of indebtedness, the net earnings of the
issuing, assuming or guaranteeing institution available
for its fixed charges, as hereinafter defined, shall
have been not less than one and one-quarter times
the total of its fixed charges for such year;
and Provided, further, that no life insurance company
shall invest in or loan upon the obligations of any one
institution in the kinds permitted under this sub-
section an amount in excess of twenty-five per
centum of the total admitted assets of such insurer as
of December thirty-first next preceding the date of
such investment.
As used in this sub-section the term "net earnings
available for fixed charges" shall mean net income
after deducting operating and maintenance expenses,
taxes other than income taxes, depreciation and
depletion; but excluding extraordinary non-recurring
items of income or expense appearing in the regular
financial statement of the issuing, assuming or
guaranteeing institution. The term "fixed
charges"shall include interest on funded and
unfunded debt, amortization of debt discount, and
rentals for leased properties.
(e) Preferred or guaranteed stocks of any solvent
corporation or institution created or existing under the
laws of the Philippines: Provided, however, That the
issuing, assuming or guaranteeing entity or its
predecessors has paid regular dividends upon its
preferred or guaranteed stocks for a period of at least
three years next preceding the date of investment in
such preferred or guaranteed stock: Provided, further,
That if the stocks are guaranteed, the amount of
stocks so guaranteed is not excess of fifty per centum
of the amount of the preferred or common stocks, as
the case may be, of the guaranteeing corporation:
and Provided, finally, That no life insurance company
shall invest in or loan upon obligations of any one
institution in the kinds permitted under this sub-
section an amount in excess of ten per centum of the
total admitted assets of such insurer as of December
thirty-first next preceding the date of such
investment.
(f) Common stocks of any solvent corporation or
institution created or existing under the laws of the
Philippines upon which regular dividends shall have
been paid for the three years next preceding the
purchase of such stock: Provided, however, That no
life insurance company shall invest in or loan upon
the obligations of any one corporation or institution in
the kinds permitted under this sub-section an amount
in excess of ten per centum of the total admitted
assets of such insurer as of December thirty-first next
preceding the date of such investment.
(g) Certificates, notes and other obligations issued by
the trustees or receivers of any institution created or
existing under the laws of the Philippines which, or
the assets of which, are being administered under the
direction of any court having jurisdiction; Provided,
however, That such certificates, notes or other
obligations are adequately secured as to principal and
interests.
(h) Equipment trust obligations or certificates which
are adequately secured or other adequately secured
instruments evidencing an interest in equipment
wholly or in part within the Philippines: Provided,
however, That there is a right to receive determined
portions of rental, purchase or other fixed obligatory
payments for the use or purchase of such equipment.
(i) Any obligation of any corporation or institution
created or existing under the laws of the Philippines
which is, on the date of acquisition by the insurer,
adequately secured and has qualities and
characteristics wherein the speculative elements are
not predominant.
(j) Such other securities as may be approved by the
Commissioner.
(3) Any domestic insurer which has outstanding
insurance, annuity or reinsurance contracts in
currencies other than the national currency of the
Philippines may invest in, or otherwise acquire or loan
upon securities and investments in such currency
which are substantially of the same kinds, classes and
investment grades as those eligible for investment
under the foregoing subdivisions of this section; but
the aggregate amount of such investment and of such
cash in such currency which is at anytime held by
such insurer shall not exceed one and one-half times
the amount of its reserves and other obligations
under such contracts or the amount which such
insurer is required by the law of any country or
possession outside the Republic of the Philippines to
be invest in such country or possession, whichever
shall be greater.
Sec. 201. An insurance company may (1) invest in
equities of other financial institutions, and (2) engage
in the buying and selling of short-term debt
instruments: Provided, That any or all of such
investments shall be with the prior approval of the
Commissioner.
Sec. 202. Any life insurance company
may:chanroblesvirtuallawlibrary
(a) Acquire or construct housing projects and, in
connection with any such project, may acquire land or
any interest therein by purchase, lease or otherwise,
or use land acquired pursuant to any other provision
of this Code. Such company may thereafter own,
maintain, manage, collect or receive income from, or
sell and convey, any land or interest therein so
acquired and any improvements thereon. The
aggregate book value of the investments of any such
company in all such projects shall not exceed at the
time of such investments twenty five per centum of
the total admitted assets of such company on the
thirty-first day of December next preceding;
(b) Acquire real property, other than property to be
used primarily for providing housing and property for
accommodation of its own business, as an investment
for the production of income, or may acquire real
property to be improved or developed for such
investment purpose pursuant to a program therefor,
subject to the condition that the cost of each parcel of
real property so acquired under the authority of this
paragraph (b), including the estimated cost to the
company of the improvement or development thereof,
when added to the book value of all other real
property held by its pursuant to this paragraph (b),
shall not exceed twenty-five per centum of its
admitted assets as of the thirty-first day of December
next preceding.
Sec. 203. Every domestic insurance company shall, to
the extent of an amount equal in value to twenty-five
per centum of the minimum paid-up capital required
under section one hundred eighty-eight, invest its
funds only in securities, satisfactory to the
Commissioner, consisting of bonds or other evidences
of debt of the Government of the Philippines or its
political subdivisions or instrumentalities, or of
government-owned or controlled corporations and
entities, including the Central Bank of the
Philippines: Provided, That such investments shall at
all times be maintained free from any lien or
encumbrance; and Provided, further, That such
securities shall be deposited with and held by the
Commissioner for the faithful performance by the
depositing insurer of all its obligations under its
insurance contracts. The provisions of section one
hundred ninety-two shall, so far as practicable, apply
to the securities deposited under this section.
Except as otherwise provided in this Code, no
judgment creditor or other claimant shall have the
right to levy upon any of the securities of the insurer
held on deposit under this section or held on deposit
pursuant to the requirement of the Commissioner. (As
amended by Presidential Decree No. 1455).
Sec. 204. After satisfying the requirements contained
in the preceding section, any domestic non-life
insurance company, shall invest, to an amount
prescribed below, its funds in, or otherwise, acquire
or loan upon, only the classes of investments
described in section two hundred, including securities
issued by any "registered enterprise", as this term is
defined in Republic Act No. 5186, otherwise known as
the Investment Incentives Act, and such other classes
of investments as may be authorized by the
Commissioner for purposes of this section:Provided,
That (a) no more than twenty per centum of the net
worth of such company as shown by its latest
financial statement approved by the Commissioner
shall be invested in the lot and building in which the
insurance company conducts its business and (b) the
total investment of an insurance company in any
registered enterprise shall not exceed twenty per
centum of the net worth of said insurance company
as shown by its aforesaid financial statement nor
twenty per centum of the paid-up capital of the
registered enterprise excluding the intended
investment, unless previously authorized by the
Commissioner: and, Provided, further, That such
investments free from any lien or encumbrance, shall
be at least equal in amount to the aggregate amount
of (a) its legal reserve, as provided in section two
hundred thirteen, and (b) its reserve fund held for
reinsurance as provided for in the pertinent treaty
provision in the case of reinsurance ceded to
authorized insurers. (As amended by Presidential
Decree No.1455).
Sec. 205. After satisfying the requirements contained
in sections one hundred ninety-one, one hundred
ninety-three, two hundred three and two hundred
four, any non-life insurance company may invest any
portion of its funds representing earned surplus in
any of the investments described in sections one
hundred ninety-eight, two hundred and two hundred
one, or in any securities issued by a "registered
enterprise" mentioned in the preceding
sections: Provided, That no investment in stocks or
bonds of any single entity shall in the aggregate,
exceed twenty per centum of the net worth of the
insurance company as shown in its latest financial
statement approved by the Commissioner or twenty
per centum of the paid-up capital of the issuing
company, whichever is lesser, unless otherwise
approved by the Commissioner.
Sec. 206. After satisfying the minimum capital
investment required in section two hundred three,
any life insurance company may invest its legal policy
reserve, as provided in section two hundred eleven or
in section two hundred twelve, in any of the classes
of securities or types of investments described in
sections one hundred ninety-eight, two hundred, two
hundred one and two hundred two, subject to the
limitations therein contained, and in any securities
issued by any "registered enterprise" mentioned in
section two hundred four, free from any lien or
encumbrance, in such amounts as may be approved
by the Commissioner. Such company may likewise
invest any portion of its earned surplus in the
aforesaid securities or investments subject to the
aforesaid limitations.
Sec. 207. Any investment made in violation of the
applicable provisions of this title shall be considered
non-admitted assets.
Sec. 208. (1) All bonds or other evidences of
indebtedness having a fixed term and rate of interest
and held by any life insurance company authorized to
do business in this country, if amply secured and if
not in default as to principal or interest, shall be
valued as follows: If purchased at par, at the par
value; if purchased above or below par, on the basis
of the purchase price adjusted so as to bring the
value to par at maturity and so as to yield in the
meantime the effective rate of interest at which the
purchase was made, or in the discretion of the
Commissioner, on the basis of the method of
calculation commonly known as the pro-rata method.
In applying the foregoing rule the purchase price shall
in no case be taken at a higher figure than the actual
market value at the time of acquisition. The
Commissioner shall have the power to determine the
eligibility of any such investments for valuation on the
basis of amortization, and may by regulation prescribe
or limit the classes of securities so eligible for
amortization. All bonds or other evidences of
indebtedness which in the judgment of the
Commissioner are not amply secured shall not be
eligible for amortization and shall be valued in
accordance with paragraph two. The Commissioner
may, if he finds that the interest of policy holders so
permit or require, by official regulation permit or
require any class or classes of insurers, other than life
insurance companies, authorized to do business in
this country, to value their bonds or other evidences
of indebtedness in accordance with the foregoing
rule.
(2) The investments of all insurers authorized to do
business in this country, except securities subject to
amortization and except as otherwise provided in this
chapter, shall be valued, in the discretion of the
Commissioner, at their market value, or at their
appraised value, or at prices determined by him as
representing their fair market value. If the
Commissioner finds that in view of the character of
investments of any insurer authorized to do business
in this country it would be prudent for such insurer to
establish a special reserve for possible losses or
fluctuations in the values of its investments, he may
require such insurer to establish such reserve,
reasonable in amount, and may require that such
reserve be maintained and reported in any statement
or report of the financial condition of such insurer.
The Commissioner may, in connection with any
examination or required financial statement of an
authorized insurer, require such insurer to furnish him
complete financial statements and audited report of
the financial condition of any corporation of which the
securities are owned wholly or partly by such insurer
and may cause an examination to be made of any
subsidiary or affiliate of such insurer.
(3) The stock of an insurance company shall be
valued at the lesser of its market value or its book
value as shown by its last approved annual statement
or the last report on examination, whichever is more
recent. The book value of a share of common stock of
an insurance company shall be ascertained by
dividing (a) the amount of its capital and surplus less
the value of all of its preferred stock, if any,
outstanding, by (b) the number of shares of its
common stock issued and outstanding.
Notwithstanding the foregoing provisions, an insurer
may, at its option, value its holdings of stock in a
subsidiary insurance company in an amount not less
than acquisition cost if such acquisition cost is less
than the value determined as hereinbefore provided.
(4) Real estate required by foreclosure or by deed in
lieu thereof, in the absence of a recent appraisal
deemed by the Commissioner to be reliable, shall not
be valued at an amount greater than the unpaid
principal of the defaulted loan at the date of such
foreclosure or deed, together with any taxes and
expenses paid or incurred by such insurer at such
time in connection with such acquisition, and the cost
of additions or improvements thereafter paid by such
insurer and any amount or amounts thereafter paid
by such insurer on any assessments levied for
improvements in connection with the
property. chanrobles virtual law library
(5) Purchase money mortgages received on
dispositions of real property held pursuant to section
one hundred ninety-eight shall be valued in an
amount equivalent to ninety per centum of the value
of such real property. Purchase money mortgages
received on disposition of real property otherwise held
shall be valued in an amount not exceeding ninety per
centum of the value of such real property as
determined by an appraisal made by an appraiser at
or about the time of disposition of such real property.
(6) The stock of a subsidiary of an insurer shall be
valued on the basis of the greater of (i) the value of
only such subsidiary of the assets of such subsidiary
as would constitute lawful investments for the insurer
if acquired or held directly by the insurer or (ii) such
other value determined pursuant to standards and
cumulative limitations, contained in a regulation to be
promulgated by the Commissioner.
(7) Notwithstanding any provision contained in this
section or elsewhere in this chapter, if the
Commissioner find that the interests of policyholders
so permit or require, he may permit or require any
class or classes of insurers authorized to do business
in this country to value their investments or any class
or classes thereof as of any date heretofore or
hereafter in accordance with any applicable valuation
or method.
Sec. 209. It shall be the duty of the officers of the
insurance company to report within the first fifteen
days of every month all such investments as may be
made by them during the preceding month, and the
Commissioner may, if such investments or any of
them seem injudicious to him, require the sale or
disposal of the same. The report shall also include a
list of investments sold or disposed of by the
company during the same period.
Title 5
RESERVES
Sec. 210. Every life insurance company, doing
business in the Philippines, shall annually make a
valuation of all policies, additions thereto, unpaid
dividends, and all other obligations outstanding on
the thirty-first day of December of the preceding
year. All such valuations shall be made upon the net
premiums basis, according to the standard adopted
by the company, which standard shall be stated in its
annual report.
Such standard of valuation whether of the net level
premium, full preliminary term, any modified
preliminary term, or select and ultimate reserve basis,
shall be according to a standard table of mortality
with interest at not more than six per centum
compound interest. When the preliminary term basis
is used, the term insurance shall be limited to the first
policy year.
The results of such valuations shall be reported to the
Commissioner on or before the thirtieth day of April of
each year accompanied by a sworn statement of the
company's actuary certifying to the figures and
stating upon what mortality table it is based, upon
what rate of interest the valuation is made, and the
methods used in arriving at the result obtained.
Sec. 211. The aggregate net value so ascertained of
the policies of such company shall be deemed its
reserve liability, to provide for which it shall hold
funds in secure investments equal to such net value,
above all its other liabilities; and it shall be the duty of
the Commissioner, after having verified, to such an
extent as he may deem necessary, the valuation of all
policies in force, to satisfy himself that the company
has such amount in safe legal securities after all other
debts and claims against it have been provided for.
The reserve liability for variable contracts defined in
section two hundred thirty-two shall be established in
accordance with actuarial procedures that recognize
the variable nature of the benefits provided, and shall
be approved by the Commissioner.
Sec. 212. Every domestic life insurance company,
conducted on the mutual plan or a plan in which
policyholders are by the terms of their policies entitled
to share in the profits or surplus shall, on all policies
of life insurance heretofore or hereafter issued, under
the conditions of which the distribution of surplus is
deferred to a fixed or specified time and contingent
upon the policy being in force and the insured living
at that time, annually ascertain the amount of the
surplus to which all such policies as separate class are
entitled, and shall annually apportion to such policies
as a class the amount of the surplus so ascertained,
and carry the amount of such apportioned surplus,
plus the actual interest earnings and accretions to
such fund, as a distinct and separate liability to such
class of policies on and for which the same was
accumulated, and no company or any of its officers
shall be permitted to use any part of such
apportioned surplus fund for any purpose whatsoever
other than for the express purpose for which the
same was accumulated.
Sec. 213. Every insurance company, other than life,
shall maintain a reserve for unearned premiums on its
policies in force, which shall be charged as a liability
in any determination of its financial condition. Such
reserve shall be equal to forty per centum of the
gross premiums, less returns and cancellations,
received on policies or risks having not more than a
year to run, and pro rata on all gross premiums
received on policies or risks having more than a year
to run: Provided, That for marine cargo risks the
reserve shall be equal to forty per centum of the
premiums written in the policies upon yearly risks,
and the full amount of the premiums written during
the last two months of the calendar year upon all
other marine risks not terminated.
Sec. 214. In addition to its liabilities and reserves on
contracts of insurance issued by it, every insurance
company shall be charged with the estimated amount
of all of its other liabilities, including taxes, expenses
and other obligations due or accrued at the date of
statement, and including any special reserves
required by the Commissioner pursuant to the
provisions of this Code.
Title 6
LIMIT OF SINGLE RISK
Sec. 215. No insurance company other than life,
whether foreign or domestic, shall retain any risk on
any one subject of insurance in an amount exceeding
twenty per centum of its net worth. For purposes of
this section, the term "subject of insurance" shall
include all properties or risks insured by the same
insurer that customarily are considered by non-life
company underwriters to be subject to loss or
damage from the same occurrence of any hazard
insured against.
Reinsurance ceded as authorized under the
succeeding title shall be deducted in determining the
risk retained. As to surety risk, deduction shall also be
made of the amount assumed by any other company
authorized to transact surety business and the value
of any security mortgage, pledged, or held subject to
the surety's control and for the surety's protection.
Title 7
REINSURANCE TRANSACTIONS
Sec. 216. An insurance company doing business in
the Philippines may accept reinsurances only of such
risks, and retain risk thereon within such limits, as it
is otherwise authorized to insure.
Sec. 217. No insurance company doing business in
the Philippines shall cede all or part of any risks
situated in the Philippines by way of reinsurance
directly to any foreign insurer not authorized to do
business in the Philippines unless such foreign insurer
or, if the services of a non-resident broker are
utilized, such non-resident broker is represented in
the Philippines by a resident agent duly registered
with the Commissioner as required in this Code.
The resident agent of such unauthorized foreign
insurer or non- resident broker shall immediately
upon registration furnish the Commissioner with the
annual statement of such insurer, or of such company
or companies where such broker may place Philippine
business as of the year preceding such registration,
and annually thereafter as soon as available.
Sec. 218. All insurance companies, both life and non-
life, authorized to do business in the Philippines shall
cede their excess risks to other companies similarly
authorized to do business in the Philippines in such
amounts and under such arrangements as would be
consistent with sound underwriting practices before
they enter into reinsurance arrangements with
unauthorized foreign insurers.
Sec. 219. Any insurance company doing business in
the Philippines desiring to cede their excess risks to
foreign insurance or reinsurance companies not
authorized to transact business in the Philippines may
do so under the following
conditions:chanroblesvirtuallawlibrary
(1) Except in facultative reinsurance and excess of
loss covers, the full amount of the reserve fund
required by law shall be set up in the books of and
held by the ceding company for so long as the risk
concerned is in force: Provided, That in case of
facultative insurance, the ceding company shall show
to the satisfaction of the Commissioner that the
Philippine market cannot provide the facilities sought
abroad.
(2) The reserve fund withheld shall be invested in
bonds or other evidences of debt of the Government
of the Philippines or its political subdivisions or
instrumentalities, or of government-owned or
controlled corporations and entities, including the
Central Bank, and/or other securities acceptable
under section two hundred.
Should any reinsurance agreement be for any reason
cancelled or terminated, the ceding company
concerned shall inform the Commissioner in writing of
such cancellation or termination within thirty days
from the date of such cancellation or termination or
from the date notice or information of such
cancellation or termination is received by such
company as the case may be.
Sec. 220. Every insurance company authorized to do
business in the Philippines shall report to the
Commissioner on forms prescribed by him the
particulars of reinsurance treaties as of the first day
of January of the year following the approval of this
Code and shall thereafter similarly report to the
Commissioner particulars of any new treaties or
changes in existing treaties.
Sec. 221. No credit shall be allowed as an admitted
asset or as a deduction from liability, to any ceding
insurer for reinsurance made, ceded, renewed, or
otherwise becoming effective after January first,
nineteen hundred seventy-five, unless the reinsurance
shall be payable by the assuming insurer on the basis
of the liability of the ceding insurer under the contract
or contracts reinsured without diminution because of
the insolvency of the ceding insurer nor unless under
the contract or contracts of reinsurance the liability
for such reinsurance is assumed by the assuming
insurer or insurers as of the same effective date; nor
unless the reinsurance agreement provides that
payments by the assuming insurer shall be made
directly to the ceding insurer or to its liquidator,
receiver, or statutory successor except (a) where the
contract specifically provides another payee of such
reinsurance in the event of the insolvency of the
ceding insurer and (b) where the assuming insurer
with the consent of the direct insured or insureds has
assumed such policy obligations of the ceding insurer
as direct obligations of the assuming insurer to the
payees under such policies and in substitution for the
obligations of the ceding insurer to such payees.
Sec. 222. No life insurance company doing business in
the Philippines shall reinsure its whole risk on any
individual life or joint lives, or substantially all of its
insurance in force, without having first obtained the
written permission of the Commissioner.
Title 8
ANNUAL STATEMENT
Sec. 223. Every insurance company doing business in
the Philippines shall terminate its fiscal period on the
thirty-first day of December every year, and shall
annually on or before the thirtieth day of April of each
year render to the Commissioner a statement signed
and sworn to by the chief officer of such company
showing, in such form and details as may be
prescribed by the Commissioner, the exact condition
of its affairs on the preceding thirty-first day of
December.
Any entry in the statement which is found to be false
shall constitute a misdemeanor and the officer signing
such statement shall be subject to the penalty
provided for under section four hundred nineteen.
Sec. 224. Every insurance company authorized under
title ten of this chapter to issue, deliver or use
variable contracts shall annually file with the
Commissioner separate annual statement of its
separate variable accounts. Such statement shall be
on a form prescribed or approved by the
Commissioner and shall include details as to all of the
income, disbursements, assets and liability items of
and associated with the said separate variable
accounts. Said statement shall be under oath of two
officers of the company and shall be filed
simultaneously with the annual statement required by
the preceding section.
Sec. 225. Within thirty days after receipt of the
annual statement approved by the Commissioner,
every insurance company doing business in the
Philippines shall publish in two newspapers of general
circulation in the City of Manila, one published in
English and one in Pilipino, a full sypnosis of its
annual financial statement showing fully the
conditions of its business, and setting forth its
resources and liabilities.
Title 9
POLICY FORMS
Sec. 226. No policy, certificate or contract of
insurance shall be issued or delivered within the
Philippines unless in the form previously approved by
the Commissioner, and no application form shall be
used with, and no rider, clause, warranty or
endorsement shall be attached to, printed or stamped
upon such policy, certificate or contract unless the
form of such application, rider, clause, warranty or
endorsement has been approved by the
Commissioner.
Sec. 227. In the case of individual life or endowment
insurance, the policy shall contain in substance the
following conditions:chanroblesvirtuallawlibrary
(a) A provision that the policyholder is entitled to a
grace period either of thirty days or of one month
within which the payment of any premium after the
first may be made, subject at the option of the
insurer to an interest charge not in excess of six per
centum per annum for the number of days of grace
elapsing before the payment of the premium, during
which period of grace the policy shall continue in full
force, but in case the policy becomes a claim during
the said period of grace before the overdue premium
is paid, the amount of such premium with interest
may de deducted from the amount payable under the
policy in settlement;
(b) A provision that the policy shall be incontestable
after it shall have been in force during the lifetime of
the insured for a period of two years from its date of
issue as shown in the policy, or date of approval of
last reinstatement, except for non-payment of
premium and except for violation of the conditions of
the policy relating to military or naval service in time
of war;
(c) A provision that the policy shall constitute the
entire contract between the parties, but if the
company desires to make the application a part of the
contract it may do so provided a copy of such
application shall be indorsed upon or attached to the
policy when issued, and in such case the policy shall
contain a provision that the policy and the application
therefor shall constitute the entire contract between
the parties;
(d) A provision that if the age of the insured is
considered in determining the premium and the
benefits accruing under the policy, and the age of the
insured has been misstated, the amount payable
under the policy shall be such as the premium would
have purchased at the correct age;
(e) If the policy is participating, a provision that the
company shall periodically ascertain and apportion
any divisible surplus accruing on the policy under
conditions specified therein;
(f) A provision specifying the options to which the
policyholder is entitled to in the event of default in a
premium payment after three full annual premiums
shall have been paid. Such option shall consist
of:chanroblesvirtuallawlibrary
(1) A cash surrender value payable upon surrender of
the policy which shall not be less than the reserve on
the policy, the basis of which shall be indicated, for
the then current policy year and any dividend
additions thereto, reduced by a surrender charge
which shall not be more than one-fifth of the entire
reserve or two and one-half per centum of the
amount insured and any dividend additions thereto;
(2) One or more paid-up benefits on a plan or plans
specified in the policy of such value as may be
purchased by the cash surrender value;
(g) A provision that at anytime after a cash surrender
value is available under the policy and while the policy
is in force, the company will advance, on proper
assignment or pledge of the policy and on sole
security thereof, a sum equal to, or at the option of
the owner of the policy, less than the cash surrender
value on the policy, at a specified rate of interest, not
more than the maximum allowed by law, to be
determined by the company from time to time, but
not more often than once a year, subject to the
approval of the Commissioner; and that the company
will deduct from such loan value any existing
indebtedness on the policy and any unpaid balance of
the premium for the current policy year, and may
collect interest in advance on the loan to the end of
the current policy year, which provision may further
provide that such loan may be deferred for not
exceeding six months after the application therefor is
made;
(h) A table showing in figures cash surrender values
and paid-up options available under the policy each
year upon default in premium payments, during at
least twenty years of the policy beginning with the
year in which the values and options first become
available, together with a provision that in the event
of the failure of the policyholder to elect one of the
said options within the time specified in the policy,
one of said options shall automatically take effect and
no policyholder shall ever forfeit his right to same by
reason of his failure to so elect;
(i) In case the proceeds of a policy are payable in
installments or as an annuity, a table showing the
minimum amounts of the installments or annuity
payments;
(j) A provision that the policyholder shall be entitled
to have the policy reinstated at any time within three
years from the date of default of premium payment
unless the cash surrender value has been duly paid,
or the extension period has expired, upon production
of evidence of insurability satisfactory to the company
and upon payment of all overdue premiums and any
indebtedness to the company upon said policy, with
interest rate not exceeding that which would have
been applicable to said premiums and indebtedness in
the policy years prior to reinstatement.
Any of the foregoing provisions or portions thereof
not applicable to single premium or term policies shall
to that extent not be incorporated therein; and any
such policy may be issued and delivered in the
Philippines which in the opinion of the Commissioner
contains provisions on any one or more of the
foregoing requirements more favorable to the
policyholder than hereinbefore required.
This section shall not apply to policies of group life or
industrial life insurance.
Sec. 228. No policy of group life insurance shall be
issued and delivered in the Philippines unless it
contains in substance the following provisions, or
provisions which in the opinion of the Commissioner
are more favorable to the persons insured, or at least
as favorable to the persons insured and more
favorable to the policy-
holders:chanroblesvirtuallawlibrary
(a) A provision that the policyholder is entitled to a
grace period of either thirty days or of one month for
the payment of any premium due after the first,
during which grace period the death benefit coverage
shall continue in force, unless the policyholder shall
have given the insurer written notice of
discontinuance in advance of the date of
discontinuance and in accordance with the terms of
the policy. The policy may provide that the
policyholder shall be liable for the payment of a pro
rata premium for the time the policy is in force during
such grace period;
(b) A provision that the validity of the policy shall not
be contested, except for non-payment of premiums
after it has been in force for two years from its date
of issue; and that no statement made by any insured
under the policy relating to his insurability shall be
used in contesting the validity of the insurance with
respect to which such statement was made after such
insurance has been in force prior to the contest for a
period of two years during such person's lifetime nor
unless contained in written instrument signed by him;
(c) A provision that a copy of the application, if any,
of the policyholder shall be attached to the policy
when issued, that all statements made by the
policyholder or by persons insured shall be deemed
representations and not warranties, and that no
statement made by any insured shall be used in any
contest unless a copy of the instrument containing
the statement is or has been furnished to such person
or to his beneficiary;
(d) A provision setting forth the conditions, if any,
under which the insurer reserves the right to require
a person eligible for insurance to furnish evidence of
individual insurability satisfactory to the insurer as a
condition to part or all of his coverage;
(e) A provision specifying an equitable adjustment of
premiums or of benefits or of both to be made in the
event that the age of a person insured has been
misstated, such provision to contain a clear statement
of the method of adjustment to be used;
(f) A provision that any sum becoming due by reason
of death of the person insured shall be payable to the
beneficiary designated by the insured, subject to the
provisions of the policy in the event that there is no
designated beneficiary, as to all or any part of such
sum, living at the death of the insured, and subject to
any right reserved by the insurer in the policy and set
forth in the certificate to pay at its option a part of
such sum not exceeding five hundred pesos to any
person appearing to the insurer to be equitably
entitled thereto by reason of having incurred funeral
or other expenses incident to the last illness or death
of the person insured;
(g) A provision that the insurer will issue to the
policyholder for delivery to each person insured an
individual certificate setting forth a statement as to
the insurance protection to which he is entitled, to
whom the insurance benefits are payable, and the
rights set forth in paragraphs (h), (i) and (j)
following;
(h) A provision that if the insurance, or any portion of
it, on a person covered under the policy ceases
because of termination of employment or of
membership in the class or classes eligible for
coverage under the policy, such person shall be
entitled to have issued to him by the insurer, without
evidence of insurability, an individual policy of life
insurance without disability or other supplementary
benefits, provided application for the individual policy
and payment of the first premium to the insurer shall
be made within thirty days after such termination and
provided further that:chanroblesvirtuallawlibrary
(1) the individual policy shall be on any one of the
forms, except term insurance, then customarily issued
by the insurer at the age and for an amount not in
excess of the coverage under the group policy; and
(2) the premium on the individual policy shall be at
the insurer's then customary rate applicable to the
form and amount of the individual policy, to the class
of risk to which such person then belongs, and to his
age attained on the effective date of the individual
policy.
(i) A provision that if the group policy terminates or is
amended so as to terminate the insurance of any
class of insured persons, every person insured
thereunder at the date of such termination whose
insurance terminates and who has been so insured
for five years prior to such termination date shall be
entitled to have issued to him by the insurer an
individual policy of life insurance subject to the same
limitations as set forth in paragraph (h), except that
the group policy may provide that the amount of such
individual policy shall not exceed the smaller of (a)
the amount of the person's life insurance protection
ceasing less the amount of any life insurance for what
he is or becomes eligible under any group policy
issued or reinstated by the same or another reinsurer
within thirty days after such termination, and (b) two
thousand pesos;
(j) A provision that if a person insured under the
group policy dies during the thirty-day period within
which he would have been entitled to an individual
policy issued to him in accordance with (h) and (i)
above and before such individual policy shall have
become effective, the amount of life insurance which
he would have been entitled to have issued to him as
an individual policy shall be payable as a claim under
the group policy whether or not application for the
individual policy or the payment of the first premium
has been made;
(k) In the case of a policy issued to a creditor to
insure debtors of such creditor, a provision that the
insurer will furnish to the policyholder for delivery to
each debtor insured under the policy a form which
will contain a statement that the life of the debtor is
insured under the policy and that any death benefit
paid thereunder by reason of his death shall be
applied to reduce or extinguish indebtedness.
The provisions of paragraphs (f) to (j) shall not apply
to policies issued to a creditor to insure his debtors. If
a group life policy is on a plan of insurance other than
term, it shall contain a non-forfeiture provision or
provisions which in the opinion of the Commissioner is
or are equitable to the insured or the
policyholder: Provided, That nothing herein contained
shall be so construed as to require group life policies
to contain the same non-forfeiture provisions as are
required of individual life policies.
Sec. 229. The term "industrial life insurance" as used
in this Code shall mean that form of life insurance
under which the premiums are payable either monthly
or oftener, if the face amount of insurance provided
in any policy is not more than five hundred times that
of the current statutory minimum daily wage in the
City of Manila, and if the words "industrial policy" are
printed upon the policy as part of the descriptive
matter.
An industrial life policy shall not lapse for non-
payment of premium if such non-payment was due to
the failure of the company to send its representative
or agent to the insured at the residence of the
insured or at some other place indicated by him for
the purpose of collecting such premium: Provided,
That the provisions of this paragraph shall not apply
when the premium on the policy remains unpaid for a
period of three months or twelve weeks after the
grace period has expired.
Sec. 230. In the case of industrial life insurance, the
policy shall contain in substance the following
provisions:chanroblesvirtuallawlibrary
(a) A provision that the insured is entitled to a grace
period of four weeks within which the payment of any
premium after the first may be made, except that
where premiums are payable monthly, the period of
grace shall be either one month or thirty days; and
that during the period of grace, the policy shall
continue in full force, but if during such grace period
the policy becomes a claim, then any overdue and
unpaid premiums may be deducted from any amount
payable under the policy in settlement;
(b) A provision that the policy shall be incontestable
after it has been in force during the lifetime of the
insured for a specified period, not more than two
years from its date of issue, except for non-payment
of premiums and except for violation of the conditions
of the policy relating to naval or military service, or
services auxiliary thereto, and except as to provisions
relating to benefits in the event of disability as
defined in the policy, and those granting additional
insurance specifically against death by accident or by
accidental means, or to additional insurance against
loss of, or loss of use of, specific members of the
body;
(c) A provision that the policy shall constitute the
entire contract between the parties, or if a copy of
the application is endorsed upon and attached to the
policy when issued, a provision that the policy and the
application therefor shall constitute the entire contract
between the parties, and in the latter case, a
provision that all statements made by the insured
shall, in the absence of fraud, be deemed
representations and not warranties;
(d) A provision that if the age of the person insured,
or the age of any person, considered in determining
the premium, or the benefits accruing under the
policy, has been misstated, any amount payable or
benefit accruing under the policy shall be such as the
premium paid would have purchased at the correct
age;
(e) A provision that if the policy is a participating
policy, the company shall periodically ascertain and
apportion any divisible surplus accruing on the policy
under the conditions specified therein;
(f) A provision that in the event of default in premium
payments after three full years' premiums have been
paid, the policy shall be converted into a stipulated
form of insurance, and that in the event of default in
premium payments after five full years' premiums
have been paid, a specified cash surrender value shall
be available, in lieu of the stipulated form of
insurance, at the option of the policyholder. The net
value of such stipulated form of insurance and the
amount of such cash value shall not be less than the
reserve on the policy and dividend additions thereto,
if any, at the end of the last completed policy year for
which premiums shall have been paid (the policy to
specify the mortality table, rate of interest and
method of valuation adopted to compute such
reserve), exclusive of any reserve on disability
benefits and accidental death benefits, less an
amount not to exceed two and one-half per
centum of the maximum amount insured by the policy
and dividend additions thereto, if any, at the end of
the last completed policy year for which premiums
shall have been paid (the policy to specify the
mortality table, rate of interest and method of
valuation adopted to compute such reserve),
exclusive of any reserve on disability benefits and
accidental death benefits, less an amount not to
exceed two and one-half per centum of the maximum
amount insured by the policy and dividend additions
thereto, if any, when the issue age is under ten years,
and less an amount not to exceed two and one-
half per centum of the current amount insured by the
policy and dividend additions thereto, if any, if the
issue age is ten years or older, and less any existing
indebtedness to the company on or secured by the
policy;
(g) A provision that the policy may be surrendered to
the company at its home office within a period of not
less than sixty days after the due date of a premium
in default for the specified cash value, provided that
the insurer may defer payment for not more than six
months after the application therefor is made;
(h) A table that shows in figures the non-forfeiture
benefits available under the policy every year upon
default in payment of premiums during at least the
first twenty years of the policy, such table to begin
with the year in which such values become available,
and a provision that the company will furnish upon
request an extension of such table beyond the year
shown in the policy;
(i) A provision that specifies which one of the
stipulated forms of insurance provided for under the
provision of paragraph (f) of this section shall take
effect in the event of the insured's failure, within sixty
days from the due date of the premium in default, to
notify the insurer in writing as to which one of such
forms he has selected;
(j) A provision that the policy may be reinstated at
any time within two years from the due date of the
premium in default unless the cash surrender value
has been paid or the period of extended term
insurance expired, upon production of evidence of
insurability satisfactory to the company and payment
of arrears of premiums with interest at a rate not
exceeding six per centum per annum payable
annually;
(k) A provision that when a policy shall become a
claim by death of the insured, settlement shall be
made upon receipt of due proof of death, or not later
than two months after receipt of such proof;
(l) A title on the face and on the back of the policy
correctly describing its form;
(m) A space on the front or the back of the policy for
the name of the beneficiary designated by the insured
with a reservation of the insured's right to designate
or change the beneficiary after the issuance of the
policy. The policy may also provide that no
designation or change of beneficiary shall be binding
on the insurer until endorsed on the policy by the
insurer, and that the insurer may refuse to endorse
the name of any proposed beneficiary who does not
appear to the insurer to have an insurable interest in
the life of the insured. Such policy may also contain a
provision that if the beneficiary designated in the
policy does not surrender the policy with due proof of
death within the period stated in the policy, which
shall not be less than thirty days after the death of
the insured, or if the beneficiary is the estate of the
insured, or is a minor, or dies before the insured, or is
not legally competent to give valid release, then the
insurer may make any payment thereunder to the
executor or administrator of the insured, or to any of
the insured's relatives by blood or legal adoption or
connections by marriage or to any person appearing
to the insurer to be equitably entitled thereto by
reason of having incurred expense for the
maintenance, medical attention or burial of the
insured; and
(n) A provision that when an industrial life insurance
policy is issued providing for accidental or health
benefits, or both, in addition to life insurance, the
foregoing provisions shall apply only to the life
insurance portion of the policy.
Any of the foregoing provisions or portions thereof
not applicable to non-participating or term policies
shall to that extent not be incorporated therein. The
foregoing provisions shall not apply to policies issued
or granted pursuant to the non-forfeiture provisions
prescribed in provisions of paragraphs (f) and (i) of
this section, nor shall provisions of paragraphs (f),
(g), (h), and (i) hereof be required in term insurance
of twenty years or less but such term policies shall
specify the mortality table, rate of interest, and
method of computing reserves.
Sec. 231. No policy of industrial life insurance shall be
issued or delivered in the Philippines if it contains any
of the following provisions:chanroblesvirtuallawlibrary
(a) A provision that gives the insurer the right to
declare the policy void because the insured has had
any disease or ailment, whether specified or not, or
because the insured has received institutional,
hospital, medical or surgical treatment or attention,
except a provision which gives the insurer the right to
declare the policy void if the insured has, within two
years prior to the issuance of the policy, received
institutional hospital, medical or surgical treatment or
attention and if the insured or the claimant under the
policy fails to show that the condition occasioning
such treatment or attention was not of a serious
nature or was not material to the risk;
(b) A provision that gives the insurer the right to
declare the policy void because the insured has been
rejected for insurance, unless such right be
conditioned upon a showing by the insurer that
knowledge of such rejection would have led to a
refusal by the insurer to make such contract;
(c) A provision that allows the company to pay the
proceeds of the policy at the death of the insured to
any person other than the named beneficiary, except
in accordance with a standard provision as specified
under the provisions of paragraph (m) of the
preceding section;
(d) A provision that limits the time within which any
action at law or in equity may be commenced to less
than six years after the cause of action shall accrue;
and
(e) A provision that specifies any mode of settlement
at maturity of less value than the amount insured by
the policy plus dividend additions, if any, less any
indebtedness to the company on the policy and less
any premium that may by the terms of the policy be
deducted, payments to be made in accordance with
the terms of the policy.
Nothing contained in this section nor in the provision
of paragraph (b) of the preceding section, relating to
incontestability, shall be construed as prohibiting the
life insurance company from placing in its industrial
life policies provisions limiting its liability with respect
to: (1) death resulting from aviation other than as a
fare-paying passenger on a regularly scheduled route
between definitely established airports; and (2)
military or naval service: Provided, That if the liability
of the company is limited as herein provided, such
liability shall in no event be fixed at an amount less
than the reserve on the policy (excluding the reserve
for any additional benefits in the event of death by
accident or accidental means or for benefits in the
event of any type of disability), less any indebtedness
on or secured by such policy; nor shall any provision
of this section apply to any provision in an industrial
life insurance policy for additional benefits in the
event of death by accident or accidental means.
Title 10
VARIABLE CONTRACTS
Sec. 232. (1) No insurance company authorized to
transact business in the Philippines shall issue,
deliver, sell or use any variable contract in the
Philippines, unless and until such company shall have
satisfied the Commissioner that its financial and
general condition and its methods of operations,
including the issue and sale of variable contracts, are
not and will not be hazardous to the public or to its
policy and contract owners. No foreign insurance
company shall be authorized to issue, deliver or sell
any variable contract in the Philippines, unless it is
likewise authorized to do so by the laws of its
domicile.
(2) The term "variable contract" shall mean any policy
or contract on either a group or on an individual basis
issued by an insurance company providing for
benefits or other contractual payments or values
thereunder to vary so as to reflect investment results
of any segregated portfolio of investments or of a
designated separate account in which amounts
received in connection with such contracts shall have
been placed and accounted for separately and apart
from other investments and accounts. This contract
may also provide benefits or values incidental thereto
payable in fixed or variable amounts, or both. It shall
not be deemed to be a "security" or"securities" as
defined in The Securities Act, as amended, or in the
The Investment Company Act, as amended, nor
subject to regulation under said Acts.
(3) In determining the qualifications of a company
requesting authority to issue, deliver, sell or use
variable contracts, the Commissioner shall always
consider the following: (a) the history, financial and
general condition of the company: Provided, That
such company, if a foreign company, must have
deposited with the Commissioner for the benefit and
security of its variable contract owners in the
Philippines, securities satisfactory to the
Commissioner consisting of bonds of the Government
of the Philippines or its instrumentalities with an
actual market value of two million pesos; (b) the
character, responsibility and fitness of the officers and
directors of the company; and (c) the law and
regulation under which the company is authorized in
the state of domicile to issue such contracts.
(4) If after notice and hearing, the Commissioner
shall find that the company is qualified to issue,
deliver, sell or use variable contracts in accordance
with this Code and the regulations and rules issued
thereunder, the corresponding order of authorization
shall be issued. Any decision or order denying
authority to issue, deliver, sell or use variable
contracts shall clearly and distinctly state the reasons
and grounds on which it is based.
Sec. 233. Any insurance company issuing variable
contracts pursuant to this Code may in its discretion
issue contracts providing a combination of fixed
amount and variable amount of benefits and for
option lump-sum payment of benefits.
Sec. 234. Every variable contract form delivered or
issued for delivery in the Philippines, and every
certified form evidencing variable benefits issued
pursuant to any such contract on a group basis, and
the application, rider and endorsement forms
applicable thereto and used in connection therewith,
shall be subject to the prior approval of the
Commissioner.
Sec. 235. Illustration of benefits payable under any
variable contract shall not include or involve
projections of past investment experience into the
future and shall conform with the rules and
regulations promulgated by the Commissioner.
Sec. 236. Variable contracts may be issued on the
industrial life basis, provided that the pertinent
provisions of this Code and of the rules and
regulations of the Commissioner governing variable
contracts are complied with in connection with such
contracts.
Sec. 237. Every life insurance company authorized
under the provisions of this Code to issue, deliver, sell
or use variable contracts shall, in connection with
same, establish one or more separate accounts to be
known as separate variable accounts. All amounts
received by the company in connection with any such
contracts which are required by the terms thereof, to
be collected or applied to one or more designated
separate variable accounts shall be placed in such
designated account or accounts. The assets and
liabilities of each such separate variable account shall
at all times be clearly identifiable and distinguishable
from the assets and liabilities in all other accounts of
the company. Notwithstanding any provision of law to
the contrary, the assets held in any such separate
variable account shall not be chargeable with
liabilities arising out of any other business the
company conduct but shall be held and applied
exclusively for the benefit of the owners or
beneficiaries of the variable contracts applicable
thereto. In the event of the insolvency of the
company, the assets of each such separate variable
account shall be applied to the contractual claims of
the owners or beneficiaries of the variable contracts
applicable thereto. Except as otherwise specifically
provided by the contract, no sale, exchange or other
transfer of assets may be made by a company,
between any of its separate accounts or between any
other investment account and one or more of its
separate accounts, unless in the case of a transfer
into a separate account, such transfer is made solely
to establish the account or to support the operation of
the contracts with respect to the separate account to
which the transfer is made, or in case of a transfer
from a separate account, such transfer would not
cause the remaining assets of the account to become
less than the reserves and other contract liabilities
with respect to such separate account. Such transfer,
whether into or from a separate account, shall be
made by a transfer of cash, or by a transfer of
securities having a valuation which could be readily
determined in the market place, provided that such
transfer of securities is approved by the
Commissioner. The Commissioner may authorize
other transfers among such accounts, if, in his
opinion, such transfer would not be inequitable. All
amounts and assets allocated to any such separate
variable account shall be owned by the company and
with respect to same the company shall not be nor
hold itself out to be a trustee.
Sec. 238. Any insurance company which has
established one or more separate variable accounts
pursuant to the preceding section may invest and re-
invest all or any part of the assets allocated to any
such account in the securities and investments
authorized by sections one hundred ninety-eight, two
hundred, two hundred one and two hundred two for
any of the funds of an insurance company in such
amount or amounts as may be approved by the
Commissioner. In addition thereto, such company
may also invest in common stocks or other equities
which are listed on or admitted to trading in a
securities exchange located in the Philippines, or
which are publicly held and traded in the "over-the-
counter market" as defined by the Commissioner and
as to which market quotations have been
available: Provided, however, That no such company
shall invest in excess of ten per centum of the assets
of any such separate variable accounts in any one
corporation issuing such common stock. The assets
and investments of such separate variable accounts
shall not be taken into account in applying the
quantitative investment limitations applicable to other
investments of the company. In the purchase of
common capital stock or other equities, the insurer
shall designate to the broker, or to the seller if the
purchase is not made through a broker, the specific
variable account for which the investment is made.
Sec. 239. Assets allocated to any separate variable
account shall be valued at their market value on the
date of any valuation, or if there is no readily
available market then in accordance with the terms of
the variable contract applicable to such assets, or if
there are no such contract terms then in such manner
as may be prescribed by the rules and regulations of
the Commissioner.
Sec. 240. The reserve liability for variable contracts
shall be established in accordance with actuarial
procedures that recognize the variable nature of the
benefits provided, and shall be approved by the
Commissioner.
Title 11
CLAIMS SETTLEMENT
Sec. 241. (1) No insurance company doing business in
the Philippines shall refuse, without just cause, to pay
or settle claims arising under coverages provided by
its policies, nor shall any such company engage in
unfair claim settlement practices. Any of the following
acts by an insurance company, if committed without
just cause and performed with such frequency as to
indicate a general business practice, shall constitute
unfair claim settlement
practices:chanroblesvirtuallawlibrary
(a) knowingly misrepresenting to claimants pertinent
facts or policy provisions relating to coverage at
issue;
(b) failing to acknowledge with reasonable
promptness pertinent communications with respect to
claims arising under its policies;
(c) failing to adopt and implement reasonable
standards for the prompt investigation of claims
arising under its policies;
(d) not attempting in good faith to effectuate prompt,
fair and equitable settlement of claims submitted in
which liability has become reasonably clear; or
(e) compelling policyholders to institute suits to
recover amounts due under its policies by offering
without justifiable reason substantially less than the
amounts ultimately recovered in suits brought by
them.
(2) Evidence as to numbers and types of valid and
justifiable complaints to the Commissioner against an
insurance company, and the Commissioner's
complaint experience with other insurance companies
writing similar lines of insurance shall be admissible in
evidence in an administrative or judicial proceeding
brought under this section.
(3) If it is found, after notice and an opportunity to be
heard, that an insurance company has violated this
section, each instance of non-compliance with
paragraph (1) may be treated as a separate violation
of this section and shall be considered sufficient cause
for the suspension or revocation of the company's
certificate of authority.
Sec. 242. The proceeds of a life insurance policy shall
be paid immediately upon maturity of the policy,
unless such proceeds are made payable in
installments or as an annuity, in which case the
installments, or annuities shall be paid as they
become due: Provided, however, That in the case of a
policy maturing by the death of the insured, the
proceeds thereof shall be paid within sixty days after
presentation of the claim and filing of the proof of the
death of the insured. Refusal or failure to pay the
claim within the time prescribed herein will entitle the
beneficiary to collect interest on the proceeds of the
policy for the duration of the delay at the rate of
twice the ceiling prescribed by the Monetary Board,
unless such failure or refusal to pay is based on the
ground that the claim is fraudulent.
The proceeds of the policy maturing by the death of
the insured payable to the beneficiary shall include
the discounted value of all premiums paid in advance
of their due dates, but are not due and payable at
maturity.
Sec. 243. The amount of any loss or damage for
which an insurer may be liable, under any policy other
than life insurance policy, shall be paid within thirty
days after proof loss is received by the insurer and
ascertainment of the loss or damage is made either
by agreement between the insured and the insurer or
by arbitration; but if such ascertainment is not had or
made within sixty days after such receipt by the
insurer of the proof of loss, then the loss or damage
shall be paid within ninety days after such receipt.
Refusal or failure to pay the loss or damage within
the time prescribed herein will entitle the assured to
collect interest on the proceeds of the policy for the
duration of the delay at the rate of twice the ceiling
prescribed by the Monetary Board, unless such failure
or refusal to pay is based on the ground that the
claim is fraudulent.
Sec. 244. In case of any litigation for the enforcement
of any policy or contract of insurance, it shall be the
duty of the Commissioner or the Court, as the case
may be, to make a finding as to whether the payment
of the claim of the insured has been unreasonably
denied or withheld; and in the affirmative case, the
insurance company shall be adjudged to pay damages
which shall consist of attorney's fees and other
expenses incurred by the insured person by reason of
such unreasonable denial or withholding of payment
plus interest of twice the ceiling prescribed by the
Monetary Board of the amount of the claim due the
insured, from the date following the time prescribed
in section two hundred forty-two or in section two
hundred forty-three, as the case may be, until the
claim is fully satisfied; Provided, That the failure to
pay any such claim within the time prescribed in said
sections shall be considered prima facie evidence of
unreasonable delay in payment.
Title 12
EXAMINATION OF COMPANIES
Sec. 245. The Commissioner shall require every
insurance company doing business in the Philippines
to keep its books, records, accounts and vouchers in
such manner that he or his authorized representatives
may readily verify its annual statements and ascertain
whether the company is solvent and has complied
with the provisions of this Code or the circulars,
instructions, rulings or decisions of the Commissioner.
Sec. 246. The Commissioner shall at least once a year
and whenever he considers the public interest so
demands, cause an examination to be made into the
affairs, financial condition and method of business of
every insurance company authorized to transact
business in the Philippines and of any other person,
firm or corporation managing the affairs and/or
property of such insurance company. Such company,
as well as such managing person, firm or corporation,
shall submit to the examiner all such books, papers
and securities as he may require and such examiner
shall also have the power to examine the officers of
such company under oath touching its business and
financial condition, and the authority to transact
business in the Philippines of any such company shall
be suspended by the Commissioner if such
examination is refused and such company shall not
thereafter be allowed to transact further business in
the Philippines until it has fully complied with the
provisions of this section.
Government-owned or controlled corporations or
entities engaged in social private insurance shall
similarly be subject to such examination by the
Commissioner unless their respective charters
otherwise provide.
Title 13
SUSPENSION OR REVOCATION OF AUTHORITY
Sec. 247. If the Commissioner is of the opinion upon
examination of other evidence that any domestic or
foreign insurance company is in an unsound
condition, or that it has failed to comply with the
provisions of law or regulations obligatory upon it, or
that its condition or method of business is such as to
render its proceedings hazardous to the public or to
its policyholders, or that its paid-up capital stock, in
the case of a domestic stock company, or its available
cash assets, in the case of a domestic mutual
company, or its security deposits, in the case of a
foreign company, is impaired or deficient, or that the
margin of solvency required of such company is
deficient, the Commissioner is authorized to suspend
or revoke all certificates of authority granted to such
insurance company, its officers and agents, and no
new business shall thereafter be done by such
company or for such company by its agent in the
Philippines while such suspension, revocation or
disability continues or until its authority to do
business is restored by the Commissioner. Before
restoring such authority, the Commissioner shall
require the company concerned to submit to him a
business plan showing the company's estimated
receipts and disbursements, as well as the basis
therefor, for the next succeeding three years. (As
amended by Presidential Decree No. 1455).
Title 14
APPOINTMENT OF CONSERVATOR
Sec. 248. If at any time before, or after, the
suspension or revocation of the certificate of authority
of an insurance company as provided in the preceding
title, the Commissioner finds that such company is in
a state of continuing inability or unwillingness to
maintain a condition of solvency or liquidity deemed
adequate to protect the interest of policy holders and
creditors, he may appoint a conservator to take
charge the assets, liabilities, and the management of
such company, collect all moneys and debts due said
company and exercise all powers necessary to
preserve the assets of said company, reorganize the
management thereof, and restore its viability. The
said conservator shall have the power to overrule or
revoke the actions of the previous management and
board of directors of the said company, any provision
of law, or of the articles of incorporation or by-laws of
the company, to the contrary notwithstanding, and
such other powers as the Commissioner shall deem
necessary.
The conservator may be another insurance company
doing business in the Philippines, by officer or officers
of such company, or any other competent and
qualified person, firm or corporation. The
remuneration of the conservator and other expenses
attendant to the conservation shall be borne by the
insurance company concerned.
The conservator shall not be subject to any action,
claim or demand by, or liability to, any person in
respect of anything done or omitted to be done in
good faith in the exercise, or in connection with the
exercise, of the powers conferred on the conservator.
The conservator appointed shall report and be
responsible to the Commissioner until such time as
the Commissioner is satisfied that the insurance
company can continue to operate on its own and the
conservatorship shall likewise be terminated should
be Commissioner, on the basis of the report of the
conservator or of his own findings, determine that the
continuance in business of the insurance company
would be hazardous to policy holders and creditors, in
which case the provisions of Title 15 shall apply.
Title 15
PROCEEDINGS UPON INSOLVENCY
Sec. 249. Whenever, upon examination or other
evidence, it shall be disclosed that the condition of
any insurance company doing business in the
Philippines is one of insolvency, or that its
continuance in business would be hazardous to its
policyholders and creditors, the Commissioner shall
forthwith order the company to cease and desist from
transacting business in the Philippines and shall
designate a receiver to immediately take charge of its
assets and liabilities, as expeditiously as possible
collect and gather all the assets and administer the
same for the benefit of its policyholders and creditors,
and exercise all the powers necessary for these
purposes including, but not limited to, bringing suits
and foreclosing mortgages in the name of the
insurance company.
The Commissioner shall thereupon determine within
thirty days whether the insurance company may be
reorganized or otherwise placed in such condition so
that it may be permitted to resume business with
safety to its policyholders and creditors and shall
prescribe the conditions under which such resumption
of business shall take place as well as the time for
fulfillment of such conditions. In such case, the
expenses and fees in the collection and administration
of the insurance company shall be determined by the
Commissioner and shall be paid out of the assets of
such company.
If the Commissioner shall determine and confirm
within the said period that the insurance company is
solvent, as defined hereunder, or cannot resume
business with safety to its policyholders and creditors,
he shall, if the public interest requires, order its
liquidation, indicate the manner of its liquidation and
approve a liquidation plan and implement it
immediately. The Commissioner shall designate a
competent and qualified person as liquidator who
shall take over the functions of the receiver previously
designated and, with all convenient speed, reinsure
all its outstanding policies, convert the assets of the
insurance company to cash, or sell, assign or
otherwise dispose of the same to the policyholders,
creditors and other parties for the purpose of settling
the liabilities or paying the debts of such company
and he may, in the name of the company, institute
such actions as may be necessary in the appropriate
Court to collect and recover accounts and assets of
the insurance company, and to do such other acts as
may be necessary to complete the liquidation as
ordered by the Commissioner.
The provisions of any law to the contrary
notwithstanding, the actions of the Commissioner
under this Section shall be final and executory, and
can be set aside by the Court upon petition by the
company and only if there is convincing proof that the
action is plainly arbitrary and made in bad faith. The
Commissioner, through the Solicitor General, shall
then file the corresponding answer reciting the
proceeding taken and praying the assistance of the
Court in the liquidation of the company. No
restraining order or injunction shall be issued by the
Court enjoining the Commissioner from implementing
his actions under this Section, unless there is
convincing proof that the action of the Commissioner
is plainly arbitrary and made in bad faith and the
petitioner or plaintiff files with the Clerk or Judge of
the Court in which the action is pending a bond
executed in favor of the Commissioner in an amount
to be fixed by the Court. The restraining order or
injunction shall be refused or, if granted, shall be
dissolved upon filing by the Commissioner, if he so
desires, of a bond in an amount twice the amount of
the bond of the petitioner or plaintiff conditioned that
it will pay the damages which the petition or plaintiff
may suffer by the refusal or the dissolution of the
injunction. The provisions of Rule 58 of the New Rules
of Court insofar as they are applicable shall govern
the issuance and dissolution of the restraining order
or injunction contemplated in this Section.
All proceedings under this Title shall be given
preference in the Courts. The Commissioner shall not
be required to pay any fee to any public officer for
filing, recording, or in any manner authenticating any
paper or instrument relating to the proceedings.
As used in this Title, the term "Insolvency" shall mean
the inability of an insurance company to pay its lawful
obligations as they fall due in the usual and ordinary
course of business as may be shown by its failure to
maintain the margin of solvency required under
Section 194 of this Code. (As amended by Presidential
Decree No. 1141 and further amended by Presidential
Decree No. 1455).
Sec. 250. In case of liquidation of an insurance
company, after payment of the cost of the
proceedings, including reasonable expenses and fees
incurred in the liquidation to be allowed by the Court,
the Commissioner shall pay all allowed claims against
such company, under order of the Court, in
accordance with their legal priority.
Sec. 251. The receiver or the liquidator, as the case
may be, designated under the provisions of this title
shall not be subject to any action, claim or demand
by, or liability to, any person in respect of anything
done or omitted to be done in good faith in the
exercise, or in connection with the exercise, of the
powers conferred on such receiver or liquidator.
Title 16
CONSOLIDATION AND MERGER OF INSURANCE
COMPANIES
Sec. 252. Upon prior notice to the Commissioner, two
or more domestic insurance companies, acting
through their respective boards of directors, may
negotiate to merge into a single corporation which
shall be one of the constituent corporations, or
consolidate into a single corporation which shall be a
new corporation to be formed by the consolidation. A
common agreement of the proposed merger or
consolidation shall be drawn up for submission to the
stockholders or members of the constituent
companies for adoption and approved in accordance
with the provisions of the respective by-laws of the
constituent companies and all existing laws that may
be pertinent.
Sec. 253. Such agreement shall include, aside from
the proposed merger or consolidation, provisions
relative to the manner of transfer of assets to and
assumption of liabilities by the absorbing or acquiring
company from the absorbed or dissolved company or
companies; the proposed articles of merger or
consolidation and by-laws of the surviving or
acquiring company; the corporate name to be
adopted which should not be that of any other
existing company transacting similar business or one
so similar as to be calculated to mislead the public;
the rights of the stockholders or members of the
absorbed or dissolved companies; date of effectivity
of the merger or consolidation; and such particulars
as may be necessary to explain and make manifest
the objects and purposes of the absorbing or
acquiring company.
Sec. 254. Upon execution of such agreement to
merge or consolidate by and between or among the
boards of directors of the constituent companies,
notice thereof shall be mailed immediately to their
policyholders and creditors. The company or
companies to be absorbed or dissolved shall
discharge all its accrued liabilities; otherwise, such
liabilities shall, with the consent of its creditors, be
transferred to and assumed by the absorbing or
acquiring company, or such liabilities be reinsured by
the latter. In the case of such policies as are subject
to cancellation by the company or companies to be
absorbed or dissolved, same may be cancelled
pursuant to the terms thereof in lieu of such transfer,
assumption, or reinsurance.
Sec. 255. Upon approval or adoption in the meetings
of the stockholders or members called for the purpose
in each of the constituent companies of the
agreement to merge or consolidate, all stockholders
or members dissenting or objecting to merger or
consolidation shall be paid the value of their shares
by the company concerned in accordance with the by-
laws thereof.
Sec. 256. Upon the approval or adoption of the
agreement to merge or consolidate by the
stockholders or members of the constituent
companies, the corresponding articles of merger or of
consolidation shall be duly executed by the presidents
and attested by the corporate secretaries and shall
bear the corporate seals of the merging or
consolidating companies setting
forth:chanroblesvirtuallawlibrary
(1) The plan of merger or the plan of consolidation;
(2) As to each corporation, the number of shares
outstanding, or in case of mutual corporations, the
number of members; and
(3) As to each corporation, the number of shares or
members voted for and against such plan
respectively. Thereafter, a certified copy of such
articles of merger or consolidation, together with a
certificate of approval or adoption by the stockholders
or members of such articles of merger or
consolidation, verified by affidavits of such officers
and under the seal of the constituent companies, shall
be submitted to the Commissioner, together with
such other papers or documents which the
Commissioner may require, for his consideration.
Sec. 257. The articles of merger or of consolidation,
signed and verified as hereinabove required, shall be
filed with the Securities and Exchange Commission for
its examination and approval.
Sec. 258. Upon receipt from the Securities and
Exchange Commission of the certificate of merger or
of consolidation, the constituent companies shall
surrender to the Commissioner their respective
certificates of authority to transact insurance
business. The absorbing or surviving company in case
of merger, or the newly formed company in case of
consolidation, shall immediately file with the
commissioner the corresponding application for
issuance of a new certificate of authority to transact
insurance business, together with a certified copy of
the certificate of merger or of consolidation, and of
the certificate of increase of stocks, if there is any,
issued by the Securities and Exchange Commission.
Sec. 259. Nothing in this title shall be construed to
enlarge the powers of the absorbing or surviving
company in case of merger, or the newly formed
company in case of consolidation, except those
conferred by the certificate of merger or of
consolidation and the articles of merger of
consolidation, or the amended articles of
incorporation, as registered with the Securities and
Exchange Commission.
Sec. 260. No director, officer, or stockholder of any
such constituent companies shall receive any fee,
commission, compensation, or other valuable
consideration whatsoever, directly or indirectly, or in
any manner aiding, promoting or assisting in such
merger or consolidation.
Sec. 261. The merger of consolidation of companies
under, this Code shall be subject to the provisions of
the Corporation Law, and, in those cases specified in
Republic Act No. 5455, as amended, be further
subject to the provisions of said law.
Title 17
MUTUALIZATION OF STOCK LIFE INSURANCE
COMPANIES
Sec. 262. Any domestic stock life insurance company
doing business in the Philippines may convert itself
into an incorporated mutual life insurer. To that end it
may provide and carry out a plan for the acquisition
of the outstanding shares of its capital stock for the
benefit of its policyholders, or any class or classes of
its policyholders, by complying with the requirements
of this chapter.
Sec. 263. Such plan shall include appropriate
proceedings for amending the insurer's articles of
incorporation to give effect to the acquisition, by said
insurer, for the benefit of its policyholders or any
class or classes thereof, of the outstanding shares of
its capital stock and the conversion of the insurer
from a stock corporation into a non-stock corporation
for the benefit of its members. The members of such
non-stock corporation shall be the policyholders from
time to time of the class or classes for whose benefit
the stock of the insurer was acquired, and the
policyholders of such other class or classes as may be
specified in such corporation's articles of incorporation
as they may be amended from time to time. Such
plan shall be:chanroblesvirtuallawlibrary
(1) Adopted by a vote of a majority of the directors;
(2) Approved by the vote of the holders of at least a
majority of the outstanding shares at a special
meeting of shareholders called for that purpose, or by
the written consent of such sharesholders;
(3) Submitted to the Commissioner and approved by
him in writing;
(4) Approved by a majority vote of all the
policyholders of the class or classes for whose benefit
the stock is to be acquired voting at an election by
the policyholders called for that purpose, subject to
the provisions of section two hundred sixty-five. The
terms "policyholder"or "policyholders" as used in this
chapter shall be deemed to mean the person or
persons insured under an individual policy of life
insurance, or of health and accident insurance, or of
any combination of life, health and accident
insurance. They shall also include the person or
persons to whom any annuity or pure endowment is
presently or prospectively payable by the terms of an
individual annuity or pure endowment contract,
except where the policy or contract declares some
other person to be the owner or holder thereof, in
which case such other person shall be deemed
policyholder. In any case where a policy or contract
names two or more persons as joint insured, payees,
owners or holders thereof, the persons so named
shall be deemed collectively to be one policyholder for
the purpose of this chapter. In any case where a
policy or contract shall have been assigned by
assignment absolute on its face to an assignee other
than the insurer, and such assignment shall have
been filed at the principal office of the insurer at least
thirty days prior to the date of any election or
meeting referred to in this chapter, then such
assignee shall be deemed at such election or meeting
to be the policyholder. For the purpose of this chapter
the terms "policyholder" and "policyholders" include
the employer to whom, or a president, secretary or
other executive officer of any corporation or
association to which a master group policy has been
issued, but exclude the holders of certificates or
policies issued under or in connection with a master
group policy. Beneficiaries under unmatured contracts
shall not as such be deemed to be policyholders;
(5) Filed with the Commissioner after having been
approved as provided in this section.
Sec. 264. The Commissioner shall examine the plan
submitted to him under the provisions of sub-
paragraph three of section two hundred sixty-three.
He shall not approve such plan unless in his opinion
the rights and interest of the insurer, its policyholders
and shareholders are protected nor unless he is
satisfied that the plan will be fair and equitable in its
operation. chanrobles virtual law library
Sec. 265. The election prescribed by sub-paragraph
four of section two hundred sixty-three shall be called
by the board of directors or the president, and every
policyholder of the class or classes for whose benefit
the stock is to be acquired, whose insurance shall
have been in force for at least one year prior to such
election shall have one vote, regardless of the
number of policies or amount of insurance he holds,
and regardless of whether such policies are policies of
life insurance or policies of health and accident
insurance or annuity contracts. Notice of such election
shall be given to policyholders entitled to vote by mail
from the principal office of such insurer at least thirty
days prior to the date set for such election, in a
sealed envelope, postage prepaid, addressed to each
such policyholder at his last known address.
Voting shall be by one of the following
methods:chanroblesvirtuallawlibrary
(1) At a meeting of such policyholders, held pursuant
to such notice, by ballot in person or by proxy.
(2) If not by the method described in the preceding
sub-paragraph, then by mail pursuant to a procedure
and on forms to be prescribed by such plan.
Such election shall be conducted under the direction
and supervision of three impartial and disinterested
inspectors appointed by the insurer and approved by
the Commissioner. In case any person appointed as
inspector fails to appear at such meeting or fails or
refuses to act at such election, the vacancy, if
occurring in advance of the convening of the meeting
or in advance of the opening of the mail vote, may be
filled in the manner prescribed for the appointment of
inspectors and, if occurring at the meeting or during
the canvass of the mail vote, may be filled by the
person acting as chairman of said meeting or
designated for that purpose in such plan. The
decision, act or certificate of a majority of the
inspectors shall be effective in all respects as the
decision, act or certificate of all. The inspectors of
election shall determine the number of policyholders,
the voting power of each, the policyholders
represented at the meeting or voting by mail, the
existence of a quorum and the authencity, validity
and effect of proxies. They shall receives votes, hear
and determine all challenges and questions in any
way arising in connection with the right to vote, count
and tabulate all votes, determine the result, and do
such other acts as are proper to conduct the vote
with fairness to all policyholders. The inspectors of
election shall, before commencing performance of
their duties, subscribe to and file with the insurer and
with the Commissioner on oath that they, and each of
them, will perform their duties impartially, in good
faith, to the best of their ability and as expeditiously
as in practicable. On the request of the insurer, the
Commissioner, a policyholder or his proxy, the
inspectors shall make a report in writing of any
challenge or question or matter determined by them
and execute a certificate of any fact found by them.
They shall also certify the result of such vote to the
insurer and to the Commissioner. Any report or
certificate made by them shall be prima
facie evidence of facts stated therein. All necessary
expenses incurred in connection with such election
shall be paid by the insurer. For the purpose of this
section, a quorum shall consist of five per centum of
the policyholders of such insurer entitled to vote at
such election.
Sec. 266. In carrying out any such plan, the insurer
may acquire any shares of its own stock by gift,
bequest or purchase. Any shares so acquired shall,
unless as a result of such acquisition all of the shares
of the insurer shall have been acquired, be acquired
in trust for the policyholders of the class or classes for
whose benefit the plan provides that the stock of the
insurer shall be acquired as hereinafter provided.
Such shares shall be assigned and transferred on the
books of such insurer and approved by the
Commissioner. Such trustees shall hold such stock in
trust until all of the outstanding shares of capital
stock of such insurer have been acquired, but for not
longer than thirty years with such extensions of not
more than five years each as may be granted by the
Commissioner. Such extensions may be granted by
the Commissioner if the plan so provides and if in his
opinion the plan of acquisition of all of such stock can
be completed within a reasonable period. Such
trustees shall vote such stock at all corporate
meetings at which stockholders have the right to
vote. When all the outstanding shares of capital stock
of such insurer have been acquired, all said shares
shall be cancelled, the certificate of amendment of
the insurer's articles of incorporation giving effect
thereto shall be filed in accordance with the
provisions of the Corporation Law, and the insurer
shall become a non-stock corporation for the profit of
its members and such trust shall thereupon
terminate. Thereafter such corporation shall be
conducted for the mutual benefit, ratably, of its
policyholders of the class or classes for whose benefit
the stock was acquired and shall have power to issue
non-assessable policies on a reserve basis subject to
all provisions of law applicable to incorporated life
insurers issuing nonassessable policies on a reserve
basis. Policies so issued may be upon the basis of full
or partial participation therein as agreed between the
insurer and the insured.
Upon the termination of any such voting trust, either
in accordance with its terms or as hereinabove
provided, such plan of mutualization shall terminate,
unless theretofore completed. Upon such termination,
unless the plan of mutualization provides for the
disposition of the shares acquired by the insurer
under such plan or for the disposition of the proceeds
thereof, the shares held by such trustees shall be
disposed of in accordance with an order of the court
of competent jurisdiction in the judicial district in
which is located the principal office of such insurer,
made upon a verified petition of the Commissioner.
Sec. 267. Any such plan of mutualization may provide
for the creation of a voting trust under a trust
agreement for the holding and voting by three or
more trustees of any portion or all of the shares of
the insurer not required upon the adoption of such
plan. The voting trustees shall be named in
accordance with such plan or, if no provision is made
therein for the naming of such trustees, then by the
insurer. The voting trust agreement and voting
trustees shall be subject to the approval of the
Commissioner. Any or all of the trustees under such
voting trust agreement may be the same person or
persons as any or all of the trustees referred to in
section two hundred sixty-six. Such voting trust
agreement shall provide that in the event of
acquisition by the insurer of any of the shares of
stock held thereunder in accordance with the
provisions of the plan, such shares so acquired
together with the voting rights thereof shall be
transferred by the trustees named under the
provisions of this section to the trustees named under
the provisions of section two hundred sixty-six. Any
voting trust agreement created pursuant to the
provisions of this section may be made irrevocable for
not longer than thirty years and thereafter until the
termination of the trust provided for in section two
hundred sixty-six. The trust created pursuant to the
provisions of this section shall terminate in any event
upon termination of the trust provided for in section
two hundred sixty-six. Upon the termination of the
trust created pursuant to the provisions of this
section, any shares held in such trust shall revert to
the persons entitled thereto by law.
Sec. 268. Every payment for the acquisition of any
shares of the capital stock of such insurer, the
purchase price of which is not fixed by such plan,
shall be subject to the prior approval of the
Commissioner. Neither such plan, nor any such
payment, may be approved by the Commissioner
unless he finds that the rights and interests of the
insurer, its policyholders, and shareholders are
protected.
Sec. 269. The trustees referred to in section two
hundred sixty-six shall file with such insurer and with
the Commissioner a verified acceptance of their
appointments and verified declarations that they will
faithfully discharge their duties as such trustees. All
dividends and other sums received by said trustees
on the shares held by them, after paying the
necessary expenses of executing their trust, shall be
immediately repaid to such insurer for the benefit of
all who are, or may become, policyholders of such
insurance of the class or classes for whose benefit the
stock of such insurer was acquired and entitled to
participate in the profits thereof and shall be added to
and become part of the assets of such insurer.
Sec. 269-A. If, at any time within the period provided
in the plan for the acquisition of the outstanding
shares of stock of the insurer, ninety percent thereof
has already been acquired and transferred to the
trustees under the plan, the insurer by a vote of a
majority of the directors may determine to make an
offer, with the permission of the Commissioner and
subject to such requirement as he may specify, to
acquire by purchase all of the shares not theretofore
acquired under the plan, at a specified price which
the insurer considers to be their fair value as of the
date of making such offer.
If the offer to acquire is permitted by the
Commissioner, the insurer shall make a written offer
by registered mail to each shareholder whose shares
have not theretofore been acquired under the plan or
otherwise, offering to acquire all his shares at such
price if accepted in writing within thirty days after the
mailing of such offer. Any shareholder accepting such
offer, within the time therefor shall, within sixty days
after his acceptance, transfer to the insurer the
certificates representing such shares and, upon doing
so, shall be paid by the insurer the amount of such
offer for his shares. Any share so acquired shall be
assigned and transferred to the trustees under the
plan and held by them as shares acquired pursuant to
the plan.
Each shareholder who does not accept such offer to
acquire his shares within the time stated in such offer
for acceptance thereof shall within fifteen days after
the expiration of such offer apply to the Secretary of
Finance for determination of the fair value of his
shares as of the date of making such offer. The
Secretary of Finance may himself, after due notice
and hearing, determine upon the evidence received
the fair value of the shares as of the date of making
such offer, or appoint three impartial and
disinterested persons to appraise the fair value of
such shares with such direction as he shall deem
proper and necessary to expedite the proceedings.
Upon completion of the appraisal proceedings, the
appraisers shall file with the Secretary of Finance their
report in writing stating the fair value of such shares
as of the date of the making of such offer and setting
forth their findings in support of such statement. The
appraisers shall furnish each party to the proceedings
a copy of their appraisal report, and within ten days
after receipt thereof any such party may signify his
objection, if any, to the report or move for the
approval thereof. Upon the expiration of the period of
ten days referred to above, the report shall be set for
hearing, after which the Secretary of Finance shall
issue an order adopting, modifying or rejecting the
report in whole or in part or he may receive further
evidence or may recommit it with instructions.
Whenever the Secretary of Finance shall determine in
any manner, as aforesaid, the fair value of such
shares, he may also determine the terms of payment
thereof by the insurer. The expenses incidental to the
proceedings including charges of the appraisers, if
any, shall be paid equally by the insurer and the
shareholder. chanrobles virtual law library
The findings of the Secretary of Finance on all
questions of fact raised at the hearing of the
application for determination of the fair value of such
shares shall be conclusive upon all parties to the
proceedings. The order of the Secretary of Finance
determining the fair value of the shares and the terms
of payment thereof shall have the force and effect of
a judgment which shall be appealable on any
question of law. Such order shall become final and
executory fifteen days after receipt thereof by the
parties to the proceedings.
Upon any such order becoming final and from which
no appeal is pending, or when the time to appeal
therefrom has expired, each shareholder party to the
proceedings shall transfer his shares to the insurer
and surrender to the said insurer the certificates
representing such shares and the insurer shall make
payment therefor as provided in such order. Any
shares so acquired by the insurer shall be assigned
and transferred to the trustees and held by them as
shares acquired pursuant to the plan.
Any shareholder who does not apply to the Secretary
of Finance in the manner and within the time
hereinbefore prescribed shall be deemed to have
accepted the offer referred to above, effective,
however, upon the expiration of the time hereinabove
prescribed for making such application, and such
shareholder's time for accepting such offer shall, for
that purpose only, be deemed to have been extended
accordingly.
Any offer to acquire shares made pursuant to this
section shall, except as otherwise provided herein, be
irrevocable until all proceedings upon such offer have
been completed or all shares have otherwise been
earlier acquired by the insurer.
Any shareholder who has expressly or impliedly
accepted the plan or the offer to acquire his shares
not theretofore acquired under the plan, and any
shareholder who has rejected such plan or such offer
and has applied, as aforesaid, to the Secretary of
Finance for a determination of the fair value of his
shares subsequent to which an agreement has been
reached or a final order issued fixing such fair value
but who fails to surrender his certificates for
cancellation upon payment of the amount to which he
is entitled, may be compelled to do so by an order of
the Secretary of Finance for that purpose and such
order may provide that upon failure of such
shareholder to surrender such certificates for
cancellation such order shall stand in lieu of such
surrender and cancellation. (As amended by
Presidential Decree No. 1280).
Sec. 270. Such insurer, after mutualization, shall be a
continuation of the original insurer, and such
mutualization shall not affect such insurer's certificate
of authority nor existing suits, rights or contracts
except as provided in said plan for the acquisition of
the outstanding shares of the capital stock of such
insurer, approved as provided in this chapter. Such
insurer, after mutualization, shall exercise all the
rights and powers and shall perform all the duties
conferred or imposed by law upon insurers writing the
classes of insurance written by it, and to protect
rights and contracts existing prior to mutualization,
subject to the effect of said plan. The board of
directors of such insurer, prior to mutualization, may
adopt amendments to its by-laws to take effect upon
mutualization.
Sec. 271. (1) An annual meeting of members shall be
held at ten o'clock in the morning of the fourth
Tuesday of March of each year at the principal office
of the insurer, unless a different time or place be
provided in the by-laws.
(2) Special meetings of the members, for any purpose
or purposes whatsoever, may be called at any time by
the president, or by the board of directors, or by one
or more members holding not less than one-fifth of
the voting power of such insurer, or by such other
officers or persons as the by-laws authorize.
(3) Notice of all meetings of members whether annual
or special shall be given in writing to the members
entitled to vote by the secretary, or an assistant
secretary, or other person charged with that duty, or
if there be no such officer, or in case of his neglect or
refusal, by any director or member. At the option of
the insurer such notice may be imprinted on premium
notices of receipts or on both.
A notice may be given by such insurer to any member
either personally, or by mail, or other means of
written communication, charges prepaid, addressed
to such member at his address appearing on the
books of the insurer, or given by him to the insurer
for the purpose of notice. If a member gives no
address, notice shall be deemed to have been given
him if sent by mail or other means of written
communication addressed to the place where the
principal office of the insurer is situated, or if
published at least once in some newspaper of general
circulation in the place in which said office is located.
Notice of any meeting of members shall be sent to
each member entitled thereto not less than seven
days before such meeting, unless the by-laws provide
otherwise.
Notice of any meeting of members shall specify the
place, the day and the hour of the meeting and the
general nature of the business to be transacted.
Notice of an annual meeting to be held at the time
and place specified in sub-paragraph one of this
section shall be sufficiently given if published at least
once in each of four successive weeks in a newspaper
of general circulation in the place in which the
principal office of such insurer is located, and if so
published no other notice of such meeting shall be
required.
(4) The presence in person or by proxy of five per
centum of the members entitled to vote at any
meeting shall constitute a quorum for the transaction
of business, unless otherwise provided by the by-
laws.
(5) Each such member shall have one vote at any
meeting of members regardless of the number of
policies or the amount of insurance that such member
holds and regardless of whether such policies are
policies of life insurance, or of health and accident
insurance, or both. Any member entitled to vote shall
have the right to do so either in person or by an
agent or agents authorized by a written proxy
executed by such person or his duly authorized agent
and filed with the secretary of such insurer.
(6) The directors of the insurer in office at the time
the insurer is mutualized as provided in this chapter
shall continue in office until the first annual meeting
of members. At the first annual meeting of members
and at each annual meeting thereafter directors shall
be elected by the members for the term or terms
authorized by this chapter.
(7) The articles of incorporation or the bay-laws may
provide that the directors may be divided into two or
more classes whose terms of office shall expire at
different times, but no terms shall continue longer
than six years. In the absence of such provisions,
each director, except members of the board of
directors at the time the insurer is mutualized, shall
be elected for a term of one year. All directors shall
hold office for a term for which they are elected and
until their successors are elected and qualified. A
director may, but need not be a member or
policyholder of the insurer of which he is acting as
director. Vacancies in the board of directors may be
filled by a majority of the remaining directors, though
less than a quorum, and each director so elected shall
hold office until the next annual meeting.
(8) All insurers mutualized under the provisions of this
chapter shall be subject to all other applicable
provisions of this Code and of the Corporation Law.
Sec. 272. The provisions of Commonwealth Act No.
83, otherwise known as the Securities Act, as
amended, shall not apply to any of the
following:chanroblesvirtuallawlibrary
(a) Shares of the capital stock of such insurer
acquired as provided in section two hundred sixty-six
and assigned and transferred to the trustees as is
provided in said section, and the assignment and
transfer of said shares as so provided;
(b) Any certificate or other instrument issued to a
policyholder of such mutualized insurer conferring or
evidencing membership in such mutualized insurer or
conferring or evidencing such member's right to
participate in the profits or share in the assets of such
mutualized insurer by the virtue of his membership
therein, and the issuance of such certificate or other
instrument;
(c) The plan for the acquisition of the outstanding
shares of the capital stock of such insurer authorized
by the provisions of this chapter, the submission of
said plan to the Commissioner and to the
policyholders of such insurer as provided in this
chapter, and the approval and carrying out of said
plan or any part thereof in accordance with the
provisions of this chapter.
 Title 18
WITHDRAWAL OF FOREIGN INSURANCE COMPANIES
Sec. 273. A foreign insurance company doing
business in the Philippines, upon payment of the fee
hereinafter prescribed and surrender to the
Commissioner of its certificate of authority, may apply
to withdraw from the Philippines. Such application
shall be duly executed in writing, accompanied by
evidence of due authority for such execution, properly
acknowledged.
Sec. 274. The Commissioner shall publish the
application for withdrawal daily for a period of one
week in two newspapers of general circulation in the
City of Manila, one in English and the other in Pilipino.
The expenses of such publication shall be paid by the
insurance company filing such application.
Sec. 275. Every foreign insurance company desiring
to withdraw from the Philippines shall, prior to such
withdrawal, discharge its liabilities to policyholders
and creditors in this country. In case of its policies
insuring residents of the Philippines, it shall cause the
primary liabilities under such policies to be reinsured
and assumed by another insurance company
authorized to transact business in the Philippines. In
the case of such policies as are subject to cancellation
by the withdrawing company, it may cancel such
policies pursuant to the terms thereof in lieu of such
reinsurance and assumption of liabilities.
Sec. 276. The Commissioner shall make an
examination of the books and records of the
withdrawing company, and if, upon such examination,
the Commissioner finds that the insurer has no
outstanding liabilities to residents of the Philippines, it
shall cancel the withdrawing company's certificate of
authority, if unexpired, and shall permit the insurer to
withdraw. The cost and expenses of all such
examination shall be paid as prescribed in section four
hundred seventeen.
Sec. 277. Upon the failure of such withdrawing
insurance company or its agents in the Philippines to
pay the expenses of such publication within thirty
days after the presentation of the bill therefor, the
Commissioner shall collect such fee from the deposit
furnished in accordance with the provisions of section
one hundred ninety-one.
Sec. 278. A foreign life insurance company that
withdraws from the Philippines shall be considered
a "servicing insurance company" if its business
transactions are confined to accepting periodic
premium payments from, or granting policy loans and
paying cash surrender values of outstanding policies
to, or reviving lapsed policies of, Philippine
policyholders, and such other related services.
Sec. 279. No company shall act as a servicing
insurance company until after it shall have obtained a
special certification of authority to act as such from
the Commissioner upon application therefor and
payment by the company of the fees hereinafter
prescribed. Such certificate shall expire on the last
day of June of each year and shall be renewed
annually, while the company continues to service its
policyholders, and to comply with all the applicable
provisions of law and regulations.
Title 19
PROFESSIONAL REINSURERS
Sec. 280. Except as otherwise provided in this Code,
no person, partnership, association or corporation
shall transact any business in the Philippines as a
professional reinsurer until it shall have obtained a
certificate of authority for that purpose from the
Commissioner upon the application therefor and
payment by such person, partnership, association or
corporation of the fees hereinafter prescribed. As
used in this Code, the term "professional
reinsurer" shall mean any person, partnership,
association or corporation that transacts solely and
exclusively reinsurance business in the Philippines.
The Commissioner may refuse to issue a certificate of
authority to any such person, partnership, association
or corporation if, in his judgment, such refusal will
best promote public interest. No such certificate of
authority shall be granted to any such person,
partnership, association or corporation unless and
until the Commissioner shall have satisfied himself by
such examination as he may make and such evidence
as he may require that such person, partnership,
association or corporation is qualified by the laws of
the Philippines to transact business therein as a
professional reinsurer.
Before issuing such certificate of authority of the
Commissioner must be satisfied that the name of the
applicant is not that of any other known company
transacting insurance or reinsurance business in the
Philippines, or a name so similar as to be calculated
to mislead the public.
Such certificate of authority shall expire on the last
day of June of each year and shall be renewed
annually if such person, partnership, association, or
corporation is continuing to comply with provisions of
this Code, or the circulars, instructions, rulings, or
decisions of the Commissioner and such other
pertinent law, rules and regulations.
Every such person, partnership, association, or
corporation receiving such certificate of authority shall
be subject to the provisions of this Code and other
related laws, and to the jurisdiction and supervision of
the Commissioner.
Sec. 281. Any person, partnership, association, or
corporation authorized to transact solely reinsurance
business must have a paid-up capital stock of at least
ten million pesos, twenty-five per centum of which
must be invested in securities satisfactory to the
Commissioner, consisting of bonds or other evidences
of debt of the Government of the Philippines or its
political subdivisions or instrumentalities, or of
government-owned or controlled corporations and
entities, including the Central Bank of the Philippines,
and deposited with the Commissioner, and the
remaining seventy-five per centum in such other
securities as may be allowed and permitted by the
Commissioner, which securities shall at all times be
maintained free from any lien or
encumbrance: Provided, That reinsurers already doing
business as such in the Philippines shall comply with
the requirement of this section by increasing their
respective capital as herein provided not later than
December thirty-one, nineteen hundred
eighty: Provided, Further, That the provisions of this
chapter applicable to insurance companies shall so far
as practicable be likewise applicable to professional
reinsurers. (As amended by Presidential Decree No.
1455).
Title 20
HOLDING COMPANIES
Sec. 282. As used in this title, the following terms
shall have the respective meanings hereinafter set
forth unless the context shall otherwise
require:chanroblesvirtuallawlibrary
(a) "Person" means an individual, partnership, firm,
association, corporation, trust, any similar entity or
any combination of the foregoing acting in concert;
(b) "Control", including the
terms "controlling", "controlled by" and "under
common control with", means the possession directly
or indirectly of the power to direct or cause the
direction of the management and policies of a person,
whether through the ownership of voting securities by
a contract other than a commercial contract for goods
or non-management services or otherwise. Subject to
section two hundred eight-four, control shall be
presumed to exist if any person directly or indirectly
owns, controls or holds with the power to vote forty
per centum or more of the voting securities of any
other person: Provided, That no person shall be
deemed to control another person solely by reason of
his being an officer or director of such other person;
(c) "Holding company" means any person who
directly or indirectly controls any authorized insurer;
(d) "Controlled insurer" means an authorized insurer
controlled directly or indirectly by a holding company;
(e) "Controlled person" means any person, other than
a controlled insurer, who is controlled directly or
indirectly by a holding company;
(f) "Holding company system" means a holding
company together with its controlled insurers and
controlled persons.
Sec. 283. Notwithstanding paragraph (b) of section
two hundred eighty-two, the Commissioner may
determine after notice and opportunity to be heard,
that a person exercises directly or indirectly either
alone or pursuant to an agreement with one or more
other persons such a controlling influence over the
management or policies of an authorized insurer as to
make it necessary or appropriate in the public interest
or for the protection of policyholders or stockholders
of the insurer that the person be deemed to control
the insurer.
Sec. 284. The Commissioner may determine upon
application that any person, either alone or pursuant
to agreement with one or more other persons, does
not or will not upon the taking of some proposed
action control another person. The filing of an
application hereunder in good faith by any person
shall relieve the applicant from any obligation or
liability imposed by this title with respect to the
subject of the application, except as contained in
section two hundred ninety-four, until the
Commissioner has acted upon the application. Within
thirty days or such further period as he may
prescribe, the Commissioner may prospectively
revoke or modify his determination, after notice and
opportunity to be heard, whenever in his judgment
revocation or modification is consistent with his title.
Sec. 285. Notwithstanding any other provisions of this
title, the following shall not be deemed holding
companies:chanroblesvirtuallawlibrary
(a) authorized insurers or reinsurers or their
subsidiaries;
(b) the Government of the Philippines, or any political
subdivision, agency or instrumentality thereof, or any
corporation which is wholly owned directly or
indirectly by one or more of the foregoing.
The Commissioner may conditionally or
unconditionally exempt any specified person or class
of persons from any of the obligations or liabilities
imposed under this title, if and to the extent he finds
the exemption necessary to appropriate in the public
interest or not adverse to the interests of
policyholders or stockholders and consistent with the
purposes of this title.
Sec. 286. (1) Every person who on the date this Code
takes effect is a controlled insurer and every person
who thereafter becomes a controlled insurer, shall,
within sixty days thereafter, or within thirty days after
becoming a controlled insurer, whichever is later,
register with the Commissioner. Such registration
shall be amended within thirty days following any
change in the identity of its holding company. The
Commissioner may grant one or more reasonable
extensions of the time to register.
(2) Every registrant shall furnish the Commissioner
with the following information concerning its holding
company: (a) a copy of its charter or articles of
incorporation and its by-laws, (b) the identities of its
principal shareholders, officers, directors and
controlled persons, and (c) information as to its
capital structure and financial condition, and a
description of its principal business activities.
Sec. 287. Every controlled insurer shall file with the
Commissioner such reports or material as he may
direct for the purpose of disclosing information
concerning the operations of persons within the
holding company system which may materially affect
the operations, management or financial condition of
the insurer.
Sec. 288. Every holding company and every controlled
person within a holding company system shall be
subject to examination by order of the Commissioner
if he has cause to believe that the operations of such
persons may materially affect the operations,
management or financial condition of any controlled
insurer with the system and that he is unable to
obtain relevant information from such controlled
insurer. The grounds relied upon by the
Commissioner for such examination shall be stated in
his order, which order shall be subject to judicial
review only at the instance of the person sought to be
examined. Such examination shall be confined to
matters specified in the order. The cost of such
examination shall be assessed against the person
examined and no portion thereof shall thereafter be
reimbursed to it directly or indirectly by the controlled
insurer.
Sec. 289. The Commissioner shall keep the contents
of each report made pursuant to this title and any
information obtained by him in connection therewith
confidential and shall not make the same public
without the prior written consent of the controlled
insurer to which it pertains unless the Commissioner
after notice and an opportunity to be heard shall
determine that the interests of policyholders,
stockholders or the public will be served by the
publication thereof. In any action or proceeding by
the Commissioner against the person examined or
any other person within the same holding company
system a report of such examination published by him
shall be admissible as evidence of the facts stated
therein.
Sec. 290. Transactions within a holding company
system to which a controlled insurer is a party shall
be subject to the following:chanroblesvirtuallawlibrary
(a) The terms shall be fair and equitable;
(b) charges or fees for services performed shall be
reasonable;
(c) expenses incurred and payments received shall be
allocated to the insurer on an equitable basis in
conformity with customary insurance accounting
practices consistently applied.
The books, accounts and records of each party to all
such transactions shall be maintained as to clearly
and accurately disclose the nature and details of the
transactions including such accounting information as
is necessary to support the reasonableness of the
charges or fees to the respective parties.
Sec. 291. The prior written approval of the
Commissioner shall be required for the following
transactions between a controlled insurer and any
person in its holding company system: sales,
purchases, exchanges, loans or extensions of credit,
or investments, involving five per centum or more of
the insurer's admitted assets as of the thirty-first day
of December next preceding.
Sec. 292. The following transactions between a
controlled insurer and any person in its holding
company system may not be entered into unless the
insurer has notified the Commissioner in writing of its
intention to enter into any such transaction at least
thirty days prior thereto, or such shorter period as he
may permit, and he has not disapproved it within
such period:chanroblesvirtuallawlibrary
(a) sales, purchases, exchanges, loans or extensions
of credit, or investments, involving more than one-
half of one per centum but less than five per centum
of the insurer's admitted assets as of the thirty-first
day of December next preceding;
(b) reinsurance treaties or agreements;
(c) rendering of services on a regular or systematic
basis; or
(d) any material transaction, specified by regulation,
which the Commissioner determines may adversely
affect the interest of the insurer's policyholders or
stockholders or of the public.
Nothing herein contained shall be deemed to
authorize or permit any transaction which, in the case
of a non-controlled insurer, would be otherwise
contrary to law.
Sec. 293. The Commissioner, in reviewing
transactions pursuant to sections two hundred ninety-
one and two hundred ninety-two, shall consider
whether the transactions comply with the standard
set forth in section two hundred ninety and whether
they may adversely affect the interests of
policyholders. This section shall not apply to
transactions subject to other sections of this Code
which impose notice or approval requirements greater
than those prescribed by this title.
Sec. 294. (1) No person, other than an authorized
insurer, shall acquire control of any domestic insurer,
whether by purchase of its securities or otherwise,
except (a) after twenty days written notice to its
insurer or such shorter period as the Commissioner
may permit, of its intention to acquire control, and (b)
with the prior written approval of the Commissioner.
(2) The Commissioner shall disapprove the acquisition
of control of a domestic insurer if he determines, after
notice and an opportunity to be heard, that such
action is reasonably necessary to protect the interest
of the people of this country. The following shall be
the only factors to be considered by him in reaching
the foregoing
determination:chanroblesvirtuallawlibrary
(a) the financial condition of the acquiring person or
and the insurer;
(b) the trustworthiness of the acquiring person or any
of its officers or directors;
(c) a plan for the proper and effective conduct of the
insurer's operations;
(d) the source of the funds or assets for the
acquisition;
(e) the fairness of any exchange of stock, assets,
cash or other consideration for the stock or assets to
be received;
(f) whether the effect of the acquisition may be
substantially to lessen competition in any line of
commerce in insurance or to tend to create a
monopoly therein; and
(g) whether the acquisition is likely to be hazardous
or prejudicial to the insurer's policyholders or
stockholders.
(3) The following conditions affecting any controlled
insurer, regardless of when such control has been
acquired, are violations of this title: (a) the controlling
person or any of its officers or directors have
demonstrated untrustworthiness; and (b) the effect of
retention of control may be substantially to lessen
competition in any line of commerce in insurance in
this country or to tend to create a monopoly therein.
If, after notice and an opportunity to be heard, the
Commissioner determines that any of the foregoing
violations exists, he shall reduce his findings to
writing and shall issue an order based thereon and
cause the same to be served upon the insurer and
upon all persons affected thereby directing any
person found to be in violation thereof to take
appropriate action to cure such violation. Upon the
failure of any such person to comply with such order,
section two hundred ninety-eight shall become
applicable.
(4) The Commissioner may require the submission of
such information as he deems necessary to determine
whether any acquisition or retention of control
complies with this title and may require, as a
condition of approval of such acquisition or retention
of control, that all or any portion of such information
be disclosed to the insurer's stockholders.
(5) Unless subject to registration under section two
hundred eighty-six or unless acquisition of its control
is subject to paragraphs one and two hereof, every
authorized insurer shall, on or before the first day of
July, nineteen hundred seventy-five, or within thirty
days after any event requiring notice hereunder,
whichever is later, notify the Commissioner in writing
of the identity of any person whom the insurer then
knows or has reason to believe controls or has taken
any action, other than preliminary negotiations or
discussion, to acquire control of the insurer.
Sec. 295. (1) Notwithstanding the control of an
authorized insurer by any person, the officers and
directors of the insurer shall not thereby be relieved
of any obligation or liability to which they would
otherwise be subject by law, and the insurer shall be
managed so as to assure its separate operating
identity consistent with this title.
(2) Nothing herein shall preclude an authorized
insurer from having or sharing a common
management or cooperative or joint use of personnel,
property or services with one or more other persons
under arrangements meeting the standards of section
two hundred ninety.
Sec. 296. To the extent that any information or
material is set forth in forms or other matter on file
with any government agency or in a registration form
filed with the Commissioner by another person within
the same holding company system, the controlled
insurer may comply with the registration or reporting
requirements of this title by referring in its
registration form or report to such other filed matter
and attaching a copy thereof certified by the insurer
as a true and complete copy, to such registration
form or report or, if such other filed matter is on file
with the Commissioner, incorporating such matter by
reference.
Sec. 297. No holding company or controlled person
shall directly or indirectly or through another person
do or cause to be done for or in behalf of the
controlled insurer any act intended to affect the
insurance operations of the insurer which, if done by
the insurer, would violate any provision of this Code.
Sec. 298. In addition to any other penalty provided by
law, the Commissioner may, upon the willful failure of
any person within a holding company system to
comply with this title or any regulation or order
promulgated hereunder:chanroblesvirtuallawlibrary
(a) proceed under title fourteen or title fifteen,
Chapter III, of this Code with respect to insurer within
the holding company system; or
(b) revoke or refuse to renew the authority to do
business in this country of an insurer within the
holding company system or refuse to issue such
authority to any other insurer in the system; or
(c) direct that, in addition to any other penalty
provided by law, such person forfeit to the people of
this country a sum not exceeding five hundred pesos
for a first violation and two thousand five hundred
pesos for any subsequent violation. An additional sum
not exceeding two thousand five hundred pesos shall
be imposed for each month during which any such
violation shall continue.
Chapter IV
SALES AGENCIES AND TECHNICAL SERVICES
Title 1
INSURANCE AGENTS AND INSURANCE BROKERS
Sec. 299. No insurance company doing business in
the Philippines, nor any agent thereof, shall pay any
commission or other compensation to any person for
services in obtaining insurance, unless such person
shall have first procured from the Commissioner a
license to act as an insurance agent of such company
or as an insurance broker as hereinafter provided.
No person shall act as an insurance agent or as an
insurance broker in the solicitation or procurement of
applications for insurance, or receive for services in
obtaining insurance, any commission or other
compensation from any insurance company doing
business in the Philippines, or any agent thereof,
without first procuring a license to act from the
Commissioner, which must be renewed annually on
the first day of January, or within six months
thereafter. Such license shall be issued by the
Commissioner only upon the written application of the
person desiring it, such application if for a license to
act as insurance agent, being approved and
countersigned by the company such person desires to
represent, and shall be upon a form prescribed by the
Commissioner giving such information as he may
require, and upon payment of the corresponding fee
hereinafter prescribed. The Commissioner shall satisfy
himself as to competence and trustworthiness of the
applicant and shall have the right to refuse to issue or
renew and to suspend or revoke any such license in
his discretion. No such license shall be valid after the
thirtieth day of June of the year following its issuance
unless it is renewed. (As amended by Presidential
Decree No. 1455).
Sec. 300. Any person who for compensation solicits or
obtains insurance on behalf of any insurance
company or transmits for a person other than himself
an application for a policy or contract of insurance to
or from such company or offers or assumes to act in
the negotiating of such insurance shall be an
insurance agent within the intent of this section and
shall thereby become liable to all the duties,
requirements, liabilities and penalties to which an
insurance agent is subject.
Sec. 301. Any person who for any compensation,
commission or other thing of value acts or aids in any
manner in soliciting, negotiating or procuring the
making of any insurance contract or in placing risk or
taking out insurance, on behalf of an insured other
than himself, shall be an insurance broker within the
intent of this Code, and shall thereby become liable to
all the duties, requirements, liabilities and penalties to
which an insurance broker is subject.
Sec. 302. Every applicant for an insurance broker's
license shall file with the application and shall
thereafter maintain in force while so licensed, a bond
in favor of the people of the Republic of the
Philippines executed by a company authorized to
become surety upon official recognizances,
stipulations, bonds and undertakings. The bond shall
be in such amount as may be fixed by the
Commissioner, but in no case less than one hundred
thousand pesos, and shall be conditioned upon full
accounting and due payment to the person entitled
thereto of funds coming into the broker's possession
through insurance transactions under license. The
bond shall remain in force until released by the
Commissioner, or until cancelled by the surety.
Without prejudice to any liability previously incurred
thereunder, the surety may cancel the bond on thirty
days advance written notice to both the broker and
the Commissioner.
Upon approval of the application, the applicant must
also file two errors and omissions (professional
liability or professional indemnity) policies issued
separately by two insurance companies authorized to
do business in the Philippines, satisfactory to the
Commissioner to indemnify the applicant against any
claim or claims for breach of duty as insurance broker
which may be made against him by reason of any
negligent act, error or omission, whenever or
wherever committed or alleged to have been
committed, on the part of the applicant or any person
who has been, is now, or may hereafter during the
subsistence of the policies be employed by the said
applicant in his capacity as insurance broker, provided
that the filing of any claim or claims under one of
such policies shall preclude the filing of the said claim
or claims under the other policy. The said policies
shall be in such amounts as may be prescribed by the
Insurance Commissioner, depending upon the size or
amount of the broking business of the applicant, but
in no case shall the amount of each of such policies
be less than five hundred thousand pesos. (As
amended by Presidential Decree No. 1455).
Sec. 303. The Commissioner shall, in order to
determine the competence of every applicant to have
the kind of license applied for, require such applicant
to submit to a written examination and to pass the
same to the satisfaction of the Commissioner. Such
examination shall be held at such times and places as
the Commissioner shall from time to time determine.
Sec. 304. An applicant for the written examination
mentioned in the preceding section must be of good
moral character and must not have been convicted of
any crime involving moral turpitude. He must
satisfactorily show to the Commissioner that he has
been trained in the kind of insurance contemplated in
the license applied for.
Such examination may be waived if it is shown to the
satisfaction of the Commissioner that the applicant
has undergone extensive education and/or training in
insurance.
Sec. 305. An application for the issuance or renewal
of a license to act as an insurance agent or insurance
broker may be refused, or such license, if already
issued or renewed, shall be suspended or revoked if
the Commissioner finds that the applicant for, or
holder of, such license:chanroblesvirtuallawlibrary
(a) has willfully violated any provision of this Code; or
(b) has intentionally made a material misstatement in
the application to qualify for such license; or
(c) has obtained or attempted to obtain a license by
fraud or misrepresentation; or
(d) has been guilty of fraudulent or dishonest
practices; or
(e) has misappropriated or converted to his own use
or illegally withheld moneys required to be held in a
fiduciary capacity;
(f) has not demonstrated trustworthiness and
competence to transact business as an insurance
agent or insurance broker in such manner as to
safeguard the public; or
(g) has materially misrepresented the terms and
conditions of policies or contracts of insurance which
he seeks to sell or has sold; or
(h) has failed to pass the written examination
prescribed, if not otherwise exempt from taking the
same.
In addition to the foregoing causes, no license to act
as insurance agent or insurance broker shall be
renewed if the holder thereof has not been actively
engaged as such agent or broker in accordance with
such rules as the Commissioner may prescribe. (As
amended by Presidential Decree No. 1814).
Sec. 306. The premium, or any portion thereof, which
an insurance agent or insurance broker collects from
an insured and which is to be paid to an insurance
company because of the assumption of liability
through the issuance of policies or contracts of
insurance, shall be held by the agent or broker in a
fiduciary capacity and shall not be misappropriated or
converted to his own use or illegally withheld by the
agent or broker.
Any insurance company which delivers to an
insurance agent or insurance broker a policy or
contract of insurance shall be deemed to have
authorized such agent or broker to receive on its
behalf payment of any premium which is due on such
policy or contract of insurance at the time of its
issuance or delivery or which becomes due thereon.
Sec. 307. Any provision of existing laws to the
contrary notwithstanding, no person shall, within the
Philippines, sell or offer for sale a variable contract or
do or perform any act or thing in the sale,
negotiation, making or consummating of any variable
contract other than for himself unless such person
shall have a valid and current license from the
Commissioner authorizing such person to act as a
variable contract agent. No such license shall be
issued unless and until the Commissioner is satisfied,
after examination that such person is by training,
knowledge, ability and character qualified to act as
such agent. Any such license may be withdrawn and
cancelled by the Commissioner after notice and
hearing, if he shall find that the holder thereof does
not then have the qualifications required for the
issuance of such license.
Sec. 308. It shall be unlawful for any person,
company or corporation in the Philippines to act as
general agent of any insurance company unless he is
empowered by a written power of attorney duly
executed by such insurance company, and registered
with the Commissioner to receive notices, summons
and legal processes for and in behalf of the insurance
company concerned in connection with actions or
other legal proceedings against said insurance
company. It shall be the duty of said general agent to
notify the Commissioner of his post office address in
the Philippines, or any change thereof. Notices,
summons, or processes of any kind sent by registered
mail to the last registered address of such general
agent of the company concerned or to the
Commissioner shall be sufficient service and deemed
as if served on the insurance company itself.
Sec. 309. Except as otherwise provided by law or
treaty, it shall be unlawful for any person,
partnership, association or corporation in the
Philippines, for himself or itself, or for some other
person, partnership, association or corporation, either
to procure, receive or forward applications of
insurance in, or to issue or to deliver or accept
policies or contracts of insurance of or for, any
insurance company or companies not authorized to
transact business in the Philippines, covering risks, life
or nonlife, situated in the Philippines; and any such
person, partnership, association or corporation
violating the provisions of this section shall be
deemed guilty of a penal offense, and upon conviction
thereof, shall for each such offense be punished by a
fine of ten thousand pesos, or imprisonment of six
months, or both at the discretion of the
court: Provided, That the provisions of this section
shall not apply to reinsurance.
Title 2
REINSURANCE BROKERS
Sec. 310. Except as provided in the next succeeding
title, no person shall act as reinsurance broker in the
Philippines unless he is authorized as such by the
Commissioner.
A reinsurance broker is one who, for compensation,
not being a duly authorized agent, employee or
officer of an insurer in which any reinsurance is
effected, act or aids in any manner in negotiating
contracts of reinsurance, or placing risks of effecting
reinsurance, for any insurance company authorized to
do business in the Philippines.
Sec. 311. Upon application and payment of the
corresponding fee hereinafter prescribed, and the
filing of two errors and omissions (professional
liability or professional indemnity) policies hereinafter
described, a person may, if found qualified, be issued
a license to act as reinsurance broker by the
Commissioner. No such license shall be valid after the
thirtieth day of June of the year following its issuance
unless it is renewed. (As amended by Presidential
Decree No. 1455).
The errors and omissions (professional liability or
professional indemnity) policies mentioned above
shall indemnify the applicant against any claim or
claims for breach of duty as reinsurance broker which
may be made against him by reason of any negligent
act, error or omission, whenever or wherever
committed or alleged to have been committed, on the
part of the applicant or any person who has been, is
now, or may hereafter during the subsistence of the
policies be employed by the said applicant in his
capacity as reinsurance broker; Provided, That the
filing of any claim or claims under one of such policies
shall preclude the filing of the said claim or claims
under the other policy. The said policies shall be
issued separately by two insurance companies
authorized to do business in the Philippines and shall
be in such amounts as may be prescribed by the
Insurance Commissioner, depending upon the size or
amount of the broking business of the applicant, but
in no case shall the amount of each of such policies
be less than five hundred thousand pesos. (As
amended by Presidential Decree No. 1455).
Sec. 312. The Commissioner may recall, suspend or
revoke the license granted to a reinsurance broker for
violation of any existing law, rule and regulation, or
any provision of this Code after due notice and
hearing.
Title 3
RESIDENT AGENTS
Sec. 313. No person shall act as resident agent, as
hereinafter defined, unless he is registered as such
with the Commissioner.
Sec. 314. The term "resident agent", as used in this
title, is one duly appointed by a foreign insurer or
broker not authorized to do business in the
Philippines to receive in its behalf notices, summons
and legal processes in connection with actions or
other legal proceedings against such foreign insurer
or broker.
Sec. 315. The application for a certificate of
registration as resident agent filed with the
Commissioner must be accompanied
with:chanroblesvirtuallawlibrary
(a) a copy of the power of attorney, duly notarized
and authenticated by the Philippine Consul in the
place where such foreign insurer or broker is
domiciled, empowering the applicant to act as
resident agent and to receive notices, summons and
legal processes for and in behalf of such foreign
insurer or broker in connection with any action or
legal proceeding against such foreign insurer or
broker; and
(b) a copy of the corresponding certificate issued by
the Board of Investments as required under Section 4
of Republic Act No. 5455, if such foreign insurer or
broker is not otherwise exempt from such
requirement.
Sec. 316. It shall be the duty of such resident agent
to notify immediately the Commissioner of any
change of his office address.
Sec. 317. A certificate of registration issued to a
resident agent shall expire on the thirtieth day of June
of the year following its issuance unless it is renewed.
The Commissioner may, after due notice and hearing,
recall or cancel the certificate of registration issued to
a resident agent for violation of any existing law, rule
or regulation, or any provision of this Code. (As
amended by Presidential Decree No. 1455).
Title 4
NON-LIFE COMPANY UNDERWRITER
Sec. 318. No person shall act, and no company shall
employ any person, as non-life company underwriter,
whose duty and responsibility it shall be to select,
evaluate and accept risks for, and to determine the
terms and conditions, including those pertaining to
amounts of retentions, under which such risks are to
be accepted by the company, unless such underwriter
is registered as such with the Commissioner.
Sec. 319. Every non-life insurance company doing
business in the Philippines must maintain at all times
a register of risks accepted and a claims register for
each line of risks engaged in by such non-life
insurance company with such entries therein as are
now or as may hereafter be required by the
Commissioner, and it shall be the responsibility of the
underwriter on the particular line or risk involved to
see to it that the said registers are well maintained
and kept, and that all entries therein are properly and
correctly recorded. Such registers shall be open to
inspection and examination of duly authorized
representative of the Commissioner at all times during
business hours.
Sec. 320. No person shall be registered with the
Commissioner, unless such person shall be at least
twenty-one years of age on the date of such
registration; a resident of the Philippines; of good
moral character and with no conviction of any crime
involving moral turpitude; has had at the time such
registration is made at least two years of underwriting
work in the particular line or risk involved; and has
passed such qualifying written examination that the
Commissioner shall conduct at such time and in such
place as he may decide to hold for applicants desiring
to act as underwriters.
Such examination shall not be required of any person
who has served as non-life company underwriter for a
period of at least five years, if the Commissioner is
satisfied of the applicant's competence as shown by
the results of his underwriting work in the non-life
insurance company or companies that employed him
in that capacity. The minimum underwriting
experience herein required may be reduced or waived
if it is shown to the satisfaction of the Commissioner
that the non-life company underwriter has undergone
extensive education and/or training in insurance.
Sec. 321. Any applicant who misrepresents or omits
any material fact in his application for registration as
a non-life company underwriter, or commits any
dishonest act in taking or in connection with the
qualifying written examination for underwriters, shall
be barred from being registered as such non-life
company underwriter and, if already registered, his
registration shall be cancelled and the certificate of
registration issued in his favor shall be recalled
immediately by the Commissioner.
In the event that the certificate of authority of a non-
life insurance company to transact business is
suspended or revoked due to business failure arising
largely from the imprudent and injudicious acceptance
of risks by the underwriter concerned, the registration
of such underwriter shall likewise be cancelled and his
certificate of registration shall be recalled by the
Commissioner, and no similar certificate shall
thereafter be issued in his favor.
Sec. 322. No certificate of registration issued to an
underwriter shall be valid after the thirtieth day of
June of the year following its issuance unless it is
renewed.
The Commissioner may, after due notice and hearing,
also suspend or cancel such certificate for violation of
existing laws, rules and regulations or of any
provisions of this Code. (As amended by Presidential
Decree No. 1455).
Title 5
ADJUSTERS
Sec. 323. No person, partnership, association, or
corporation shall act as an adjuster, as hereinafter
defined, unless authorized so to act by virtue of a
license issued or renewed by the Commissioner
pursuant to the provisions of this
Code: Provided, That in the case of a natural person,
he must be a Filipino citizen and in the case of a
partnership, association or corporation, at least sixty
per centum of its capital must be owned by citizens of
the Philippines.
Sec. 324. An adjuster may be an independent
adjuster or a public adjuster.
The term "independent adjuster" means any person,
partnership, association or corporation which, for
money, commission or any other thing of value, acts
for or on behalf of an insurer in the adjusting of
claims arising under insurance contracts or policies
issued by such insurer.
The term "public adjuster" means any person,
partnership, association or corporation which, for
money, commission or any other thing of value, acts
on behalf of an insured in negotiating for, or
effecting, the settlement of a claim or claims of the
said insured arising under insurance contracts or
policies, or which advertises for or solicits
employment as an adjuster of such claims.
Sec. 325. For every line of insurance claim
adjustment, adjusters shall be licensed either as
independent adjusters or as public adjusters. No
adjuster shall act on behalf of an insurer unless said
adjuster is licensed as an independent adjuster; and
no adjuster shall act on behalf of an insured unless
said adjuster is licensed as a public
adjuster: Provided, however, That when a firm or
person has been licensed as public adjuster, he shall
not be granted another license as independent
adjuster and vice versa.
No license, however, shall be required of any
company adjuster who is a salaried employee of an
insurance company for the adjustment of claims filed
under policies issued by such insurance company.
Sec. 326. Such license or any renewal thereof may be
issued by the Commissioner upon written application
filed by the person interested on the form or forms
prescribed by the Commissioner, which shall contain
such information as he may require, and upon
payment of the corresponding fee hereinafter
prescribed.
Sec. 327. The Commissioner shall conduct, at such
times, and in such places as he may decide to hold,
written examinations to determine the competence
and ability of applicants desiring to act as adjuster of
insurance claims.
Sec. 328. Every adjuster's license issued hereunder
shall be valid until after the thirtieth day of June of
the year following the issuance of such license unless
it is renewed. (As amended by Presidential Decree
No. 1455).
Sec. 329. Nothing contained in this title shall apply to
any duly licensed attorney-at-law who acts or aids in
adjusting insurance claims as an incident to the
practice of his profession and who does not advertise
himself as an adjuster.
Sec. 330. The Commissioner may suspend or revoke
any adjuster's license if, after giving notice and
hearing to the adjuster concerned, the Commissioner
finds that the said adjuster:chanroblesvirtuallawlibrary
(1) has violated any provision of this Code and of the
circulars, rulings and instructions of the Commissioner
or has violated any law in the course of his dealings
as an adjuster; or
(2) has made a material misstatement in the
application for such license; or
(3) has been guilty of fraudulent or dishonest
practices; or
(4) has demonstrated his incompetence or
untrustworthiness to act as adjuster; or
(5) has made patently unjust valuation of loss; or
(6) has failed to make a report of the adjustment he
proposed within sixty days from the date of the filing
of the claim by the insured with the insurer, unless
prevented so to do by reasons beyond his control; or
(7) has refused to allow an examination into his
affairs or method of doing business as hereinafter
provided.
Sec. 331. Every adjuster shall submit to the
Commissioner a quarterly report of all losses which
are the subject of adjustment effected by him during
each month in the form prescribed by the
Commissioner. The report shall be filed within one
month after the end of each quarter.
Sec. 332. Every adjuster shall keep his or its books,
records, reports, accounts, and vouchers in such
manner that the Commissioner or his duly authorized
representatives may readily verify the quarterly
reports of the said adjuster and ascertain whether the
said adjuster has complied with the provisions of law
or regulations obligatory upon him or whether the
method of doing business of the said adjuster has
been fair, just and honest.
Sec. 333. The Commissioner shall, at least once a
year and whenever he considers the public interest so
demands, cause an examination to be made into the
affairs and method of doing business of every
adjuster.
Sec. 334. Any violation of any provision of this title
shall be punished by a fine of not more than ten
thousand pesos, or by imprisonment in the discretion
of the court; Provided, That, in case of a partnership,
association or corporation, the said penalty shall be
imposed upon the partner, president, manager,
managing director, director or person in charge of its
business or responsible for the violation.
Title 6
ACTUARIES
Sec. 335. No life insurance company shall be licensed
to do business in the Philippines nor shall any life
insurance company doing business in the Philippines
be allowed to continue doing such business unless
they shall engage the services of an actuary duly
accredited with the Commissioner who shall, during
his tenure of office, be directly responsible for the
direction and supervision of all actuarial work
connected with or that may be involved in the
business of the insurance company.
Sec. 336. Any person may be officially accredited by
the Commissioner to act as any actuary in any life
insurance company or in any mutual benefit
association authorized to do business in the
Philippines upon application therefor and the payment
of the corresponding fee hereinafter
prescribed: Provided, That: (1) he is a fellow of good
standing of the Acturial Society of the Philippines at
the time of his appointment and remains in such good
standing during the tenure of his engagement; or (2)
in the case of one who is not a fellow of the Acturial
Society of the Philippines, he meets all the
requirements of the said Society for accreditation as a
fellow of the Society, and has been given permission
by the pertinent government authorities in the
Philippines to render services in the Philippines, in the
event that he is not a citizen of the Philippines.
No certificate of registration issued under this title
shall be valid after the thirtieth day of June of the
year following its issuance unless it is renewed. (As
amended by Presidential Decree No. 1455).
Sec. 337. The following documents, which are from
time to time submitted to the Commissioner by a life
insurance company authorized to do business in the
Philippines, shall be duly certified by an accredited
actuary employed by such
company:chanroblesvirtuallawlibrary
1. Policy reserves and net due and deferred
premiums.
2. Statements of bases and net premiums, loading for
gross premiums, and on non-forfeiture values and
reserves, when applying for approval of gross
premiums, reserves and non-forfeiture values.
3. Policies of insurance under any plan submitted to
the Commissioner as required by law.
4. Annual statements and valuation reports submitted
to the Commissioner as required by law.
5. Financial projection showing the probable income
and outgo and reserve requirements, enumerating
the acturial assumptions and bases of projections.
6. Valuation of annuity funds or retirement plans.
Any life insurance company authorized to do business
in the Philippines may employ any person who is not
officially accredited under either of the qualifications
for any kind of acturial work, provided that he shall
not, at any time, have the authority to certify to the
correctness of the foregoing documents.
Sec. 338. No accredited actuary shall serve more than
one client or employer at the same time. However,
one already in the employ of an insurance company
may be allowed by the Commissioner to serve a
mutual benefit association or any other insurance
company, provided the following conditions are first
complied with: (a) that the request to engage his
services by the other employer is in writing; (b) that
his present employer acquiesced to it in writing; and
(c) that he furnishes the Commissioner with copies of
said request and acquiescence.
Title 7
RATING ORGANIZATION AND RATE MAKING
Sec. 339. Every organization which now exists or
which may hereafter be formed for the purpose of
making rates to be used by more than one insurance
company authorized to do business in the Philippines
shall be known as a "rating organization." The
term "rate" as used in this title shall generally mean
the ratio of the premium to the amount insured and
shall include, as the context may require, either the
consideration to be paid or charged for insurance
contracts, including surety bonds, or the elements
and factors forming the basis for the determination or
application of the same, or both.
Sec. 340. Every rating organization which now exists
or which may hereafter be formed shall be subject to
the provisions of this title.
Sec. 341. No rating organization hereafter formed
shall commence rate-making operations until it shall
have obtained a license from the Commissioner.
Before obtaining such license, such rating
organization shall file with the Commissioner a notice
of its intention to commence rate-making operations,
a copy of its constitution, articles of agreement or
association, or of incorporation, and its by-laws, a list
of insurance companies that have agreed to become
members or subscribers, and such other information
concerning such rating organization and its operations
as may be required by the Commissioner. If the
Commissioner finds that the organization has
complied with the provisions of law and that it has a
sufficient number of members or subscribers and is
otherwise qualified to function as a rating
organization, the Commissioner may issue a license to
such rating organization authorizing it to make rates
for the kinds of insurance or subdivisions thereof as
may be specified in such license. No license issued to
a rating organization shall be valid after the thirtieth
day of June of the year following its issuance unless it
is renewed. No rating organization which now exists
and is not licensed pursuant to this section shall
continue rate-making operations until it shall have
obtained from the Commissioner a license which he
may issue if satisfied that such organization is
complying with the provisions of this title. Every
rating organization shall notify the Commissioner
promptly of every change in (1) its constitution, its
articles of agreement or association or its certificate
of incorporation, and its by-laws rules and regulations
governing the conduct of its business, and (2) its list
of members and subscribers.
A "member" means an insurer who participates in or
is entitled to participate in the management of a
rating organization.
A "subscriber" means an insurer which is furnished at
its request with rates and rating manuals by a rating
organization of which it is not a member. (As
amended by Presidential Decree No. 1455).
Sec. 342. Each rating organization shall furnish its
rating service without discrimination to all of its
members and subscribers, and shall, subject to
reasonable rules and regulations, permit any
insurance company doing business in the Philippines,
not admitted to membership, to become a subscriber
to its rating services for any kind of insurance or
subdivisions thereof. Notice of proposed changes in
such rules and regulations shall be given to
subscribers. The reasonableness of any rule or
regulation in its application to subscribers, or the
refusal of any rating organization to admit an
insurance company as a subscriber, shall, at the
request of any subscriber or any such insurance
company, be reviewed by the Commissioner at a
hearing held upon at least ten days' written notice to
such rating organization and to such subscriber or
insurance company. The Commissioner may, after
such hearing, issue an appropriate order.
Sec. 343. No rating organization or any other
association shall refuse to do business with, or
prohibit or prevent the payment of commissions to,
any person licensed as an insurance broker pursuant
to the provisions of title one of this chapter.
Sec. 344. Rating organization shall be subject to
examination by the Commissioner, as often as he may
deem such examination expedient, pursuant to the
provisions of this Code applicable to the examination
of insurance companies. He shall cause such an
examination of each rating organization to be made
at least once in every five years.
Sec. 345. The Commissioner may suspend or revoke
the license of any rating organization which fails to
comply with his order within the time limited by such
order, or any extension thereof which he may grant.
The Commissioner may determine when a suspension
of license shall become effective and it shall remain in
effect for the period fixed by him, unless he modifies
or rescinds such suspension.
Sec. 346. Any rating organization may subscribe for
or purchase acturial, technical or other services, and
such services shall be available to all members and
subscribers without discrimination.
Sec. 347. Any rating organization may provide for the
examination of policies, daily reports, binders,
renewal certificates, endorsements or other evidences
of insurance, or the cancellation thereof, and may
make reasonable rules governing their submission.
Such rules shall contain a provision that in the event
an insurance company does not within sixty days
furnish satisfactory evidence to the rating
organization of the correction of any error or omission
previously called to its attention by the rating
organization, it shall be the duty of the rating
organization to notify the Commissioner thereof. All
information so submitted for examination shall be
confidential.
Sec. 348. Cooperation among rating organizations or
among rating organizations and insurers in rate
making or in other matters within the scope of this
title is hereby authorized, provided the filings
resulting from such cooperation are subject to all
provisions of this title which are applicable to filings
generally. The Commissioner may review such
cooperative activities and practices and if he finds
that any such activity or practice is unfair or
unreasonable or otherwise inconsistent with the
provisions of this title, he may issue a written order
specifying in what respects such activity or practice is
unfair or unreasonable or otherwise inconsistent with
the provisions of this title, and requiring the
discontinuance of such activity or practice.
Sec. 349. Every rating organization and every
insurance company which makes and files its own
rates, shall make rates for all risks rated by such
organization or insurance company in accordance with
the following provisions:chanroblesvirtuallawlibrary
(a) Basic classification, manual, minimum, class, or
schedule rates or rating plans, shall be made and
adopted for all such risks. Any departure from such
rates shall be in accordance with schedules, rating
plans and rules filed with the Commissioner;
(b) Rates shall be reasonable and adequate for the
class of risks to which they apply;
(c) No rate shall discriminate unfairly between risks
involving essentially the same hazards and expense
elements or between risks in the application of like
charges and credits;
(d) Consideration shall be given to the past and
prospective loss experience, including the
conflagration and catastrophe hazards, if any, to all
factors reasonably attributable to the class of risks, to
a reasonable profit, to commissions paid during the
most recent annual period and to past and
prospective other expenses. In case of fire insurance
rates, consideration shall be given to the experience
of the fire insurance business during a period of not
less than five years next preceding the year in which
the review is made;
(e) Risk may be grouped by classifications for the
establishment of rates and minimum premiums.
Classification rates may be modified to produce rates
for individual risks in accordance with rating plans
which establish standards for measuring variations in
hazards or expense provisions, or both. Such
standards may measure any difference among risks
that can be demonstrated to have a probable effect
upon losses or expenses.
Sec. 350. No rating organization and no insurance
company which makes and files its own rates shall
make or promulgate any rate or schedule of rates
which is to be applied to any fire risk on the condition
that the whole amount of insurance on any risk or
any specified part thereof shall be placed with the
members of or subscribers to such rating organization
or with such insurer.
Sec. 351. Every insurance company doing business in
the Philippines shall annually file with the rating
organization of which it is a member or subscriber, or
with such other agency as the Commissioner may
designate, a statistical report showing a classification
schedule of its premiums and losses on all kinds or
types of insurance business to which section three
hundred forty-nine is applicable, and such other
information as the Commissioner may deem
necessary or expedient for the administration of the
provisions of this title.
Sec. 352. Every non-life rating organization and every
non-life insurance company doing business in the
Philippines shall file with the Commissioner, except as
to risks which by general custom of the business are
not written according to manual rates or rating plans,
every rate manual, schedule of rates, classification of
risks, rating plan, and every other rating rule and
every modification of any of the foregoing which it
proposes to use. An insurance company may satisfy
its obligation to make such filings for any kind or type
of insurance by becoming a member of or subscriber
to a rating organization which makes such filings for
such kind or type of insurance, and by authorizing the
Commissioner to accept such filings of the rating
organization on behalf of such insurance company.
Sec. 353. Every manual or schedule of rates and
every rating plan filed as provided in the preceding
section shall state or clearly indicate the character
and extent of the coverage to which any such rate or
any modification thereof will be applied.
Sec. 354. The Commissioner shall review filings as
soon as reasonably possible after they have been
made in order to determine whether they meet the
requirements of this title. When a filing is not
accompanied by the information upon which the
insurance company supports such filing, and the
Commissioner does not have sufficient information to
determine whether such filing meets the requirements
of this title, he shall require such insurance company
to furnish the information upon which it supports such
filing. The information furnished in support of a filing
may include: (1) the experience or judgment of the
insurance company or rating organization making the
filing; (2) its interpretation of any statistical data it
relies upon; (3) the experience of other insurance
companies or rating organization; or (4) any other
relevant factors.
Sec. 355. If the Commissioner finds that any rate
filings theretofore filed with him do not comply with
the provisions of this title or that they provide rates or
rules which are inadequate, excessive, unfairly
discriminatory or otherwise unreasonable, he may
order the same withdrawn and at the expiration of
sixty days thereafter the same shall be deemed no
longer on file. Before making any such finding and
order, the Commissioner shall give notice, not less
than ten days in advance, and a hearing, to the rating
organization, or to the insurer, which filed the same.
Such order shall not affect any contract or policy
made or issued prior to the expiration of such sixty
day period.
Sec. 356. No member or subscriber of a rating
organization, and no insurance company doing
business in the Philippines, or agent, employee or
other representative of such company, and no
insurance broker shall charge or demand a rate or
receive a premium which deviates from the rates,
rating plans, classifications, schedules, rules and
standards, made and last filed by a rating
organization or by or on behalf of the insurance
company, or shall issue or make any policy or
contract involving violation of such rate filings.
Sec. 357. Notwithstanding any other provisions of this
title, upon the written application of the insurer,
stating his reasons therefor, filed with and approved
by the Commissioner, a rate in excess of that
provided by a filing otherwise applicable may be used
on any specific risk.
Sec. 358. Whenever the Commissioner shall
determine, after notice and a hearing, that the rates
charged or filed on any class of risks are excessive,
discriminatory, inadequate or unreasonable, he shall
order that such rates be appropriately adjusted. For
the purpose of applying the provisions of this section,
the Commissioner may from time to time approve
reasonable classifications of risks for any or all such
classes, having due regard to the past and
prospective loss experience, including conflagration or
catastrophe hazards, if any, to all other relevant
factors and to a reasonable profit.
Sec. 359. Nothing contained in this title shall be
construed as requiring any insurer to become a
member of or subscriber to any rating organization.
Sec. 360. Agreements may be made among insurance
companies with respect to the equitable
apportionment among them of insurance which may
be afforded applicants who are in good faith entitled
to but are unable to procure such insurance through
ordinary methods and such insurance companies may
agree among themselves on the use of reasonable
rates and modifications for such insurance, such
agreements and rate modifications to be subject to
the approval of the Commissioner; Provided,
however, That the provisions of this section shall not
be deemed to apply to workmen's compensation
insurance.
Sec. 361. No insurance company doing business in
the Philippines or any agent thereof, no insurance
broker, and no employee or other representative of
any such insurance company, agent, or broker, shall
make, procure or negotiate any contract of insurance
or agreement as to policy contract, other than is
plainly expressed in the policy or other written
contract issued or to be issued as evidence thereof, or
shall directly or indirectly, by giving or sharing a
commission or in any manner whatsoever, pay or
allow or offer to pay or allow to the insured or to any
employee of such insured, either as an inducement to
the making of such insurance or after such insurance
has been effected, any rebate from the premium
which is specified in the policy, or any special favor or
advantage in the dividends or other benefits to accrue
thereon, or shall give or offer to give any valuable
consideration or inducement of any kind, directly or
indirectly, which is not specified in such policy or
contract of insurance; nor shall any such company, or
any agent thereof, as to any policy or contract of
insurance issued, make any discrimination against any
Filipino in the sense that he is given less
advantageous rates, dividends or other policy
conditions or privileges than are accorded to other
nationals because of his race.
Sec. 362. No insurance company doing business in
the Philippines, and no officer, director, or agent
thereof, and no insurance broker or any other person,
partnership or corporation shall issue or circulate or
cause or permit to be issued or circulated any
literature, illustration, circular or statement of any sort
misrepresenting the terms of any policy issued by any
insurance company of the benefits or advantages
promised thereby, or any misleading estimate of the
dividends or share of surplus to be received thereon,
or shall use any name or title of any policy or class of
policies misrepresenting the true nature thereof; nor
shall any such company or agent thereof, or any
other person, partnership or corporation make any
misleading representation or incomplete comparison
of policies to any person insured in such company for
the purpose of inducing or tending to induce such
person to lapse, forfeit, or surrender his said
insurance.
Sec. 363. If the Commissioner, after notice and
hearing, finds that any insurance company, rating
organization, agent, broker or other person has
violated any of the provisions of this title, it shall
order the payment of a fine not to exceed five
hundred pesos for each such offense, and shall
immediately revoke the license issued to such
insurance company, rating organization, agent, or
broker. The issuance, procurement or negotiation of a
single policy or contract of insurance shall be deemed
a separate offense.
Title 8
PROVISION COMMON TO AGENTS, BROKERS,
AND ADJUSTERS
Sec. 364. A license issued to a partnership,
association or corporation to act as an insurance
agent, general agent, insurance broker, reinsurance
broker, or adjuster shall authorize only the individual
named in the license who shall qualify therefor as
though an individual licensee. The Commissioner shall
charge, and the licensee shall pay, a full additional
license fee as to each respective individual so named
in such license in excess of one.
Licenses and certificates of registration issued under
the provisions of this chapter may be renewed by the
filing of notices of intention on forms to be prescribed
by the Commissioner and payment of the fees
therefor. (As amended by Presidential Decree No.
1455).
Chapter V
SECURITY FUND
Sec. 365. There is hereby created a fund to be known
as the "Security Fund" which shall be used in the
payment of allowed claims against an insurance
company authorized to transact business in the
Philippines remaining unpaid by reason of the
solvency of such company. The said Fund may also
be used to reinsure the policy of the insolvent insurer
in any solvent insurer authorized to do business in the
Philippines as provided in section two hundred forty-
nine. In the event of national emergency or calamity,
the Fund may likewise be used to pay insured claims
which otherwise would not be compensable under the
provisions of the policy. No payment from the
Security Fund shall, however, be made to any person
who owns or controls ten per centum or more of the
voting shares of stock of the insolvent insurer and no
payment on any one claim shall exceed twenty
thousand pesos.
Sec. 366. Such Fund shall consist of all payments
made to the Fund by insurance companies authorized
to do business in the Philippines. Payments made by
life insurance companies shall be treated separately
from those made by non-life insurance companies
and the corresponding fund shall be called "Life
Account" and "Non-Life Account", respectively, and
shall be held and administered as such by the
Commissioner in accordance with the provisions of
this title. The "Life Account" shall be utilized
exclusively for disbursements that refer to life
insurance companies, while the "Non-Life
Account" shall be utilized exclusively for
disbursements that refer to non-life insurance
companies.
Sec. 367. All insurance companies doing business in
the Philippines shall contribute to the Security Fund,
Life or Non-Life Account, as the case may be, on or
before the fifteenth day of June, nineteen hundred
and seventy-five, the aggregate amount of five million
pesos for each Account. The contributions of the life
insurance companies and of the non-life insurance
companies shall be in direct proportion to the ratio
between a particular life insurance company or a
particular non-life insurance company's net worth and
the aggregate net worth of all life insurance
companies or all non-life insurance companies, as the
case may be, as shown in their latest financial
statements approved by the Commissioner. This
proportion applied to the five million pesos shall be
the contribution of a particular company to the
corresponding Account of the Security Fund.
The amount of five million pesos in each Account shall
be in the form of a revolving trust fund. The
respective contributions of the companies shall
remain as admitted assets in their books and any
disbursement therefrom shall be deducted
proportionately from the contributions of each
company which will be allowed as deductions for
income tax purposes. Any earnings of the Fund shall
be turned over to the contributing companies in
proportion to their contributions.
In the case of disbursements of funds from the Fund
as provided in the foregoing paragraph, the life and
non-life companies, as the case may be, shall
replenish the amount disbursed in direct proportion to
the individual company's net worth and the aggregate
net worth of the life or non-life companies, as the
case may be. However, in no case shall the Fund
exceed the aggregate amount of ten million pesos, or
five million pesos for each Account.
Should the Fund, Life of Non-Life Account, as the
case may be, be inadequate for a disbursement as
provided for, then the Life or Non-Life companies, as
the case may be, shall contribute to the Fund their
respective shares in the proportion previously
mentioned.
Sec. 368. The Commissioner may adopt, amend, and
enforce all reasonable rules and regulations necessary
for the proper administration of the Fund and of the
Accounts. In the event any insurer shall fail to make
any payment required by this title, or that any
payment made is incorrect, he shall have full
authority to examine all the books and records of the
insurer for the purpose of ascertaining the facts and
shall determine the correct amount to be paid and
may proceed in any court of competent jurisdiction to
recover for the benefit of the Fund or of the Account
concerned any sum shown to be due upon such
examination and determination. Any insurer which
fails to make any payment to the Fund or to the
Account concerned when due, shall thereby forfeit to
said Fund or Account concerned a penalty of five per
centum of the amount determined to be due as
provided by this title, plus one per centum of such
amount for each month of delay or fraction thereof,
after the expiration of the first month of such delay,
but the Commissioner, if satisfied that the delay was
excusable, may remit all or any part of such penalty.
The Commissioner, in his discretion, may suspend or
revoke the certificate of authority to do business in
the Philippines of any insurance company which shall
fail to comply with this title or to pay any penalty
imposed in accordance therewith.
Sec. 369. The Accounts created by this title shall be
separate and apart from each other and from any
other fund. The Treasurer of the Philippines shall be
the custodian of the Life Account and Non-Life
Account of the Security Fund; and all disbursements
from any Account shall be made by the Treasurer of
the Philippines upon vouchers signed by the
Commissioner or his deputy, as hereinafter provided.
The moneys of said Account may be invested by the
Commissioner only in bonds or other evidences of
debt of the government of the Philippines or its
political subdivisions or instrumentalities. The
Commissioner may sell any of the securities in which
an Account is in vested, if advisable, for its proper
administration or in the best interest of such Account.
Sec. 370. Payments from either the Life Insurance
Account or Non-Life Account, as the case may be,
shall be made by the Treasurer of the Philippines to
the Commissioner, upon the authority of appropriate
certificate filed with him by the Commissioner acting
in such capacity.
Sec. 371. The Commissioner may, in his discretion,
designate or appoint a duly authorized representative
or representatives to appear and defend before any
court or other body or official having jurisdiction any
or all actions or proceedings against principals or
assureds on insurance policies or contracts issued to
them where the insurer has become insolvent or
unable to meet its insurance obligations. The
Commissioner shall have, as of the date of insolvency
of such insurer or as of the date of its inability meet
its insurance obligations, only the rights which such
insurer would have had if it had not become insolvent
or unable to meet its insurance obligations. For the
purpose of this title the Commissioner shall have
power to employ such counsel, clerks and assistants
as he may deem necessary.
Sec. 372. The expense of administering an Account
shall be paid out of the Account concerned. The
Commissioner shall serve as administrator of the Fund
and of the Accounts without additional compensation,
but may be allowed and paid from the Account
concerned expenses incurred in the performance of
his duties in connection with said Account. The
compensation of those persons employed payable
from the Account concerned. The Commissioner shall
include in his annual report to the Secretary of
Finance a statement of the expenses of administration
of the Fund and of the Life Account and Non-Life
Account for the preceding year.
Chapter VI
COMPULSORY MOTOR VEHICLE
LIABILITYINSURANCE
Sec. 373. For purposes of this
chapter:chanroblesvirtuallawlibrary
(a) "Motor Vehicle" is any vehicle as defined in section
three, paragraph (a) of Republic Act Numbered Four
Thousand One Hundred Thirty-Six, Otherwise known
as the "Land Transportation and Traffic Code."
(b) "Passenger" is any fare paying person being
transported and conveyed in and by a motor vehicle
for transportation of passengers for compensation,
including persons expressly authorized by law or by
the vehicle's operator or his agents to ride without
fare.
(c) "Third-Party" is any person other than a
passenger as defined in this section and shall also
exclude a member of the household, or a member of
the family within the second degree of consanguinity
or affinity, of a motor vehicle owner or land
transportation operator, as likewise defined herein, or
his employee in respect of death, bodily injury, or
damage to property arising out of and in the course
of employment. (As amended by Presidential Decree
No. 1814 and 1981).
(d) "Owner" or "motor vehicle owner" means the
actual legal owner of a motor vehicle, in whose name
such vehicle is duly registered with the Land
Transportation Commission;
(e) "Land transportation operator" means the owner
or owners of motor vehicles for transportation of
passengers for compensation, including school buses;
(f) "Insurance policy" or "Policy" refers to a contract
of insurance against passenger and thirty-party
liability for death or bodily injuries and damaged to
property arising from motor vehicle accidents. (As
amended by Presidential Decree No. 1455 and 1814).
Sec. 374. It shall be unlawful for any land
transportation operator or owner of a motor vehicle to
operate the same in the public highways unless there
is in force in relation thereto a policy of insurance or
guaranty in cash or surety bond issued in accordance
with the provisions of this chapter to indemnify the
death, bodily injury, and/or damage to property of a
third-party or passenger, as the case may be, arising
from the use thereof. (As amended by Presidential
Decree No. 1455 and 1814).
Sec. 375. The Commissioner shall furnish the Land
Transportation Commissioner with a list of insurance
companies authorized to issue the policy of insurance
or surety bond required by this chapter. (As amended
by Presidential Decree No. 1814).
Sec. 376. The Land Transportation Commission shall
not allow the registration or renewal of registration of
any motor vehicle without first requiring from the land
transportation operator or motor vehicle owner
concerned the presentation and filing of a
substantiating documentation in a form approved by
the Commissioner evidencing that the policy of
insurance or guaranty in cash or surety bond required
by this chapter is in effect. (As amended by
Presidential Decree No. 1455).
Sec. 377. Every land transportation operator and
every owner of a motor vehicle shall, before applying
for the registration or renewal of registration of any
motor vehicle, at his option, either secure an
insurance policy or surety bond issued by any
insurance company authorized by the Commissioner
or make a cash deposit in such amount as herein
required as limit of liability for purposes specified in
section three hundred seventy-four.
(1) In the case of a land transportation operator, the
insurance guaranty in cash or surety bond shall cover
liability for death or bodily injuries of third-parties
and/or passengers arising out of the use of such
vehicle in the amount not less than twelve thousand
pesos per passenger or third party and an amount,
for each of such categories, in any one accident of
not less than that set forth in the following
scale:chanroblesvirtuallawlibrary
(a) Motor vehicles with an authorized capacity of
twenty-six or more passengers: Fifty thousand pesos;
(b) Motor vehicles with an authorized capacity of from
twelve to twenty-five passengers: Forty thousand
pesos;
(c) Motor vehicles with an authorized capacity of from
six to eleven passengers: Thirty thousand pesos;
(d) Motor vehicles with an authorized capacity of five
or less passengers: Five thousand pesos multiplied by
the authorized capacity.
Provided, however, That such cash deposit made to,
or surety bond posted with, the Commissioner shall
be resorted to by him in cases of accidents the
indemnities for which to third-parties and/or
passengers are not settled accordingly by the land
transportation operator and, in that event, the said
cash deposit shall be replenished or such surety bond
shall be restored with sixty days after impairment or
expiry, as the case may be, by such land
transportation operator, otherwise, he shall secure
the insurance policy required by this chapter. The
aforesaid cash deposit may be invested by the
Commissioner in readily marketable government
bonds and/or securities.
(2) In the case of an owner of a motor vehicle, the
insurance or guaranty in cash or surety bond shall
cover liability for death or injury to third parties in an
amount not less than that set forth in the following
scale in any one accident:chanroblesvirtuallawlibrary
I. Private Cars
(a) Bantam : Twenty thousand pesos;
(b) Light : Twenty thousand pesos;
(c) Heavy : Thirty thousand pesos;
II. Other Private Vehicles
(a) Tricycles, motorcyles, and scooters : Twelve
thousand pesos;
(b) Vehicles with an unladen weight of 2,600 kilos or
less : Twenty thousand pesos;
(c) Vehicles with an unladen weight of between 2,601
kilos and 3,930 kilos : Thirty thousand pesos;
(d) Vehicles with an unladen weight over 3,930 kilos :
Fifty thousand pesos.
The Commissioner may, if warranted, set forth
schedule of indemnities for the payment of claims for
death or bodily injuries with the coverages set forth
herein. (As amended by Presidential Decree No. 1455
and 1814).
Sec. 378. Any claim for death or injury to any
passenger or third party pursuant to the provisions of
this chapter shall be paid without the necessity of
proving fault or negligence of any kind; Provided,
That for purposes of this
section:chanroblesvirtuallawlibrary
(i) The total indemnity in respect of any person shall
not exceed five thousand pesos;
(ii) The following proofs of loss, when submitted
under oath, shall be sufficient evidence to
substantiate the claim:chanroblesvirtuallawlibrary
(a) Police report of accident; and
(b) Death certificate and evidence sufficient to
establish the proper payee; or
(c) Medical report and evidence of medical or hospital
disbursement in respect of which refund is claimed;
(iii) Claim may be made against one motor vehicle
only. In the case of an occupant of a vehicle, claim
shall lie against the insurer of the vehicle in which the
occupant is riding, mounting or dismounting from. In
any other case, claim shall lie against the insurer of
the directly offending vehicle. In all cases, the right of
the party paying the claim to recover against the
owner of the vehicle responsible for the accident shall
be maintained.
Sec. 379. No land transportation operator or owner of
motor vehicle shall be unreasonably denied the policy
of insurance or surety bond required by this chapter
by the insurance companies authorized to issue the
same, otherwise, the Land Transportation
Commission shall require from said land
transportation operator or owner of the vehicle, in
lieu of a policy of insurance or surety bond, a
certificate that a cash deposit has been made with the
Commissioner in such amount required as limits of
indemnity in section three hundred seventy-seven to
answer for the passenger and/or third-party liability of
such land transportation operator or owner of the
vehicle.
No insurance company may issue the policy of
insurance or surety bond required under this chapter
unless so authorized under existing laws.
The authority to engage in the casualty and/or surety
lines of business of an insurance company that
refuses to issue or renew, without just cause, the
insurance policy or surety bond therein required shall
be withdrawn immediately. (As amended by
Presidential Decree No. 1455 and 1814).
Sec. 380. No cancellation of the policy shall be valid
unless written notice thereof is given to the land
transportation operator or owner of the vehicle and to
the Land Transportation Commission at least fifteen
days prior to the intended effective date thereof.
Upon receipt of such notice, the Land Transportation
Commission, unless it receives evidence of a new
valid insurance or guaranty in cash or surety bond as
prescribed in this chapter, or an endorsement of
revival of the cancelled one, shall order the immediate
confiscation of the plates of the motor vehicle covered
by such cancelled policy. The same may be re-issued
only upon presentation of a new insurance policy or
that a guaranty in cash or surety band has been
made or posted with the Commissioner and which
meets the requirements of this chapter, or an
endorsement or revival of the cancelled one. (As
amended by Presidential Decree No. 1455).
Sec. 381. If the cancellation of the policy or surety
bond is contemplated by the land transportation
operator or owner of the vehicle, he shall, before the
policy or surety bond ceases to be effective, secure a
similar policy of insurance or surety bond to replace
the policy or surety bond to be cancelled or make a
cash deposit in sufficient amount with the
Commissioner and without any gap, file the required
documentation with the Land Transportation
Commission, and notify the insurance company
concerned of the cancellation of its policy or surety
bond. (As amended by Presidential Decree No. 1455).
Sec. 382. In case of change of ownership of a motor
vehicle, or change of the engine of an insured vehicle,
there shall be no need of issuing a new policy until
the next date of registration or renewal of registration
of such vehicle, and provided that the insurance
company shall agree to continue the policy, such
change of ownership or such change of the engine
shall be indicated in a corresponding endorsement by
the insurance company concerned, and a signed
duplicate of such endorsement shall, within a
reasonable time, be filed with the Land
Transportation Commission.
Sec. 383. In the settlement and payment of claims,
the indemnity shall not be availed of by any accident
victim or claimant as an instrument of enrichment by
reason of an accident, but as an assistance or
restitution insofar as can fairly be ascertained.
Sec. 384. Any person having any claim upon the
policy issued pursuant to this Chapter shall, without
any unnecessary delay, present to the insurance
company concerned a written notice of claim setting
forth the nature, extent and duration of the injuries
sustained as certified by a duly licensed physician.
Notice of claim must be filed within six months from
date of accident, otherwise, the claim shall be
deemed waived. Action or suit for recovery of damage
due to loss or injury must be brought, in proper
cases, with the Commissioner or the Courts within
one year from denial of the claim, otherwise, the
claimant's right of action shall prescribe. (As amended
by Presidential Decree 1814 and Batas Pambansa Blg.
874).
Sec. 385. The insurance company concerned shall
forthwith ascertain the truth and extent of the claim
and make payment within five working days after
reaching an agreement. If no agreement is reached,
the insurance company shall pay only the "no-
fault" indemnity provided in section three hundred
seventy-eight without prejudice to the claimant from
pursuing his claim further, in which case, he shall not
be required or compelled by the insurance company
to execute any quit claim or document releasing it
from liability under the policy of insurance or surety
bond issued. (As amended by Presidential Decree No.
1455).
In case of any dispute in the enforcement of the
provisions of any policy issued pursuant to this
chapter, the adjudication of such dispute shall be
within the original and exclusive jurisdiction of the
Commissioner, subject to the limitations provided in
section four hundred sixteen.
Sec. 386. It shall be unlawful for a land transportation
operator or owner of motor vehicle to require his or
its drivers or other employees to contribute in the
payment of premiums.
Sec. 387. No government office or agency having the
duty of implementing the provisions of this chapter
nor any official or employee thereof shall act as agent
in procuring the insurance policy or surety bond
provided for herein. The commission of an agent
procuring the said policy or bond shall in no case
exceed ten per centum of the amount of the
premiums therefor.
Sec. 388. Any land transportation operator or owner
of motor vehicle or any other person violating any of
the provisions of the preceding sections shall be
punished by a fine of not less than five hundred pesos
but not more than one thousand pesos and/or
imprisonment for not more than six months. The
violation of section three hundred seventy-seven by a
land transportation operator shall be a sufficient
cause for the revocation of the certificate of public
convenience issued by the Board of Transportation
covering the vehicle concerned.
Sec. 389. Whenever any violation of the provisions of
this chapter is committed by a corporation or
association, or by a government office or entity, the
executive officer or officers of said corporation,
association or government office or entity who shall
have knowingly permitted, or failed to prevent, said
violation shall be held liable as principals.
Chapter VII
MUTUAL BENEFIT ASSOCIATIONS AND
TRUSTS FOR CHARITABLE USES
Title 1
MUTUAL BENEFIT ASSOCIATIONS
Sec. 390. Any society, association or corporation,
without capital stock, formed or organized not for
profit but mainly for the purpose of paying sick
benefits to members, or of furnishing financial
support to members while out of employment, or of
paying to relatives of deceased members of fixed or
any sum of money, irrespective of whether such aim
or purpose is carried out by means of fixed dues or
assessments collected regularly from the members, or
of providing, by the issuance of certificates of
insurance, payment of its members of accident or life
insurance benefits out of such fixed and regular dues
or assessments, but in no case shall include any
society, association, or corporation with such mutual
benefit features and which shall be carried out purely
from voluntary contributions collected not regularly
and or no fixed amount from whomsoever may
contribute, shall be known as a mutual benefit
association within the intent of this Code.
Any society, association, or corporation principally
organized as labor union shall be governed by
the Labor Code notwithstanding any mutual benefit
feature provisions in its charter as incident to its
organization.
In no case shall a mutual benefit association be
organized and authorized to transact business as a
charitable or benevolent organization, and whenever
it has this feature as incident to its existence, the
corresponding charter provision shall be revised to
conform with the provision of this section. Mutual
benefit association, already licensed to transact
business as such on the date this Code becomes
effective, having charitable or benevolent feature
shall abandon such incidental purpose upon effectivity
of this Code if they desire to continue operating as
such mutual benefit associations. (As amended by
Presidential Decree No. 1455).
Sec. 391. A mutual benefit association, before it may
transact as such, must first secure a license from the
Commissioner. The application for such license shall
be filed with the Commissioner together with certified
true copies of the articles of incorporation or the
constitution and by-laws of the association, and all
amendments thereto, and such other documents or
testimonies as the Commissioner may require.
No license shall be granted to a mutual benefit
association until the Commissioner shall have been
satisfied by such examination as may make and such
evidence as he may require that the association is
qualified under existing laws to operate and transact
business as such. The Commissioner may refuse to
issue a license to any mutual benefit association if, in
his judgment, such refusal will best promote the
interest of the members of such association and of
the people of this country. Any license issued shall
expire on the last day of June of the year following its
issuance and, upon proper application, may be
renewed if the association is continuing to comply
with existing laws, rules and regulations, orders,
instructions, rulings and decisions of the
Commissioner. Every association receiving any such
license shall be subject to the supervision of the
Commissioner: Provided, That no such license shall be
granted to any such association if such association
has no actuary.
All mutual benefit association existing and licensed as
such under the provisions of Article Eight, Chapter
Forty-One of the Revised Administrative Code, as
amended by Act No. 3612, shall, upon effectivity of
this Code, surrender their respective licenses to the
Commissioner and apply for new licenses under the
provisions of this code if they still desire to continue
operating as such mutual benefit associations.
Sec. 392. No mutual benefit association shall be
issued a license to operate as such unless it has
constituted and established a Guaranty Fund by
depositing with the Commissioner an initial minimum
amount of ten thousand pesos in cash, or in
government securities with a total value equal to such
amount, to answer for any valid benefit claim of any
of its members.
All moneys received by the Commissioner for this
purpose must be deposited by him in interest-bearing
deposits with any bank or banks authorized to
transact business in the Philippines for the account of
the particular association constituting the Guaranty
Fund.
Any accrual to such fund, be it interest earned or
dividend additions on moneys or securities so
deposited, may, with the prior approval of the
Commissioner, be withdrawn by the association if
there is no pending benefit claim against it, including
interest thereon or dividend additions thereto.
The Commissioner, prior to or after licensing a mutual
benefit association, may require such association to
increase its Guaranty Fund from the initial minimum
amount required to an amount equal to at least ten
per centum of its assets, if such assets exceed one
hundred thousand pesos, but in no case shall such
increase exceed the maximum amount of capital
investment required of a domestic insurance company
under section two hundred and three of this
Code. (As amended by Presidential Decree No. 1455).
Sec. 393. Every mutual benefit association licensed to
do business as such shall issue membership
certificates to its members specifying the benefits to
which such members are entitled.
Such certificates, together with the articles of
incorporation of the association or its constitution and
by-laws, and all existing laws as may be pertinent
shall constitute the agreement, as of the date of its
issuance, between the association and the member.
The membership certificate shall be in a form
previously approved by the Commissioner.
Sec. 394. A mutual benefit association may, by
reinsurance agreement, cede in whole or in part any
individual risk or risks under certificates of insurance
issued by it, only to a life insurance company
authorized to transact business or to a professional
reinsurer authorized to accept life risks in the
Philippines: Provided, That copy of the draft of such
reinsurance agreement shall be submitted to the
Commissioner for his approval. The association may
take credit for the reserves on such ceded risks to the
extent reinsured.
Sec. 395. The constitution or by-laws of a mutual
benefit association must distinctly state the purpose
for which dues and/or assessments are made and
collected and the portion thereof which may be used
for expenses.
Death benefit and other relief funds shall be created
and used exclusively for paying benefits due the
members under their respective membership
certificates. A general fund shall likewise be created
and used for expenses of administration of the
association.
Sec. 396. Every outstanding membership certificate
must have, after three full years of being continuously
in force, an equity value equivalent to at least
fifty per centum of the total membership dues
collected thereon.
Sec. 397. Every mutual benefit association must
accumulate and maintain, out of the periodic dues
collected from its members, sufficient reserves for the
payment of claims or obligations for which it shall
hold funds in securities satisfactory to the
Commissioner consisting of bonds of the Government
of the Philippines, or any of its political subdivisions
and instrumentalities, or in such other good securities
as may be approved by the Commissioner.
The reserve liability shall be established in accordance
with acturial procedures and shall be approved by the
Commissioner.
The articles of incorporation or the constitution and
by-laws of a mutual benefit association must provide
that if its reserve as to all or any class of certificates
becomes impaired, its board of directors or trustees
may require that there shall be paid by the members
to the association the amount of the members'
equitable proportion of such deficiency as ascertained
by said board and that if the payment be not made it
shall stand as an indebtedness against the
membership certificates of the defaulting members
and draw interest not to exceed five per centum per
annum compounded annually.
Sec. 398. A mutual benefit association may invest
such portion of its funds as shall not be required to
meet pending claims and other obligations in any of
the classes of investments or types of securities in
which life insurance companies doing business in the
Philippines may invest.
It may also grant loans to members on the security of
a pledge or chattel mortgage of personal properties of
the borrowers, or in the absence thereof, on the
security of the membership certificate of the
borrowing members, in which event such loan shall
become a first lien on the proceed thereof.
Sec. 399. The Commissioner or any of his duly
designated representatives, shall have the power of
visitation, audit and examination into the affairs,
financial condition, and methods of doing business of
all mutual benefit associations, and he shall cause
such examination to be made at least once every two
years or whenever it may be deemed proper and
necessary. Free access to the books, records and
documents of the association shall be accorded to the
Commissioner, to his representatives, in such manner
that the Commissioner or his representatives may
readily verify or determine the true affairs, financial
condition, and method of doing business of such
association. In the course of such examination, the
Commissioner or his duly designated representatives
shall have authority to administer oaths and take
testimony or other evidence on any matter relating to
the affairs of the association.
All minutes of the proceedings of the board of
directors or trustees of the association, and those of
the regular or special meetings of the members, shall
be take, and a copy thereof, in English or in Pilipino,
shall be submitted to the Commissioner's
representatives or examiners in the course of such
examination.
A copy of the findings of such examination, together
with the recommendations of the Commissioner, shall
be furnished the association for its information and
compliance, and the same shall be taken up
immediately in the meetings of the board of directors
or trustees and of the members of the association.
Sec. 400. Every mutual benefit association shall,
annually on or before the thirtieth day of April of each
year, render to the Commissioner an annual
statement in such form and details as may be
prescribed by the Commissioner, signed and sworn to
by the president, secretary, treasurer, and actuary of
the association, showing the exact condition of its
affairs on the preceding thirty-first day of December.
Sec. 401. No money, aid or benefit to be paid,
provided or tendered by any mutual benefit
association, shall be liable to attachment,
garnishment, or other process, or be seized, taken,
appropriated, or applied by any legal or equitable
process to pay any debt of liability of a member or
beneficiary, or any other person who may have a
right thereunder, either before or after payment.
Sec. 402. Any member of a mutual benefit association
shall have the right at all times to change the
beneficiary or beneficiaries or add another beneficiary
or other beneficiaries in accordance with the rules
and regulations of the association unless he has
expressly waived this right in the membership
certificate. Every association may, under such rules as
it may adopt, limit the scope of beneficiaries and
provide that no beneficiary shall have or obtain any
vested interest in the proceeds of any certificate until
the certificate has become due and payable under the
terms of the membership certificate.
Sec. 403. Any chapter affiliate independently licensed
as a mutual benefit association may consolidate or
merge with any other similar chapter affiliate or with
the mother association.
Sec. 404. Any mutual benefit association may be
converted into and licensed as a mutual life insurance
company by complying with the requirements of the
pertinent provisions of this Code and submitting the
specific plan for such conversion to the Commissioner
for his approval. Such plan, as approved, shall then
be submitted to the members either in the regular
meeting or in a special meeting called for the purpose
for their adoption. The affirmative vote of at least
two-thirds of all the members shall be necessary in
order to consider such plan as adopted.
No such conversion shall take effect unless and until
approved by the Commissioner.
Sec. 405. No mutual benefit association shall be
dissolved without first notifying the Commissioner and
furnishing him with a certified copy of the resolution
authorizing the dissolution, duly adopted by the
affirmative vote of two-thirds of the members at a
meeting called for that purpose, the financial
statements as of the date of the resolution, and such
other papers or documents as may be required by the
Commissioner.
No dissolution shall proceed until and unless approved
by the Commissioner and all proceedings in
connection therewith shall be witnessed and attested
by his duly designated representative.
No mutual benefit association shall be officially
declared as dissolved until after the Commissioner so
certifies that all outstanding claims against the
association have been duly settled and liquidated.
Sec. 406. The Commissioner shall after notice and
hearing, have the power either to suspend or revoke
the licensed issued to a mutual benefit association if
he finds that the association
has:chanroblesvirtuallawlibrary
(a) failed to comply with any provision of this Code;
(b) failed to comply with any other law or regulation
obligatory upon it;
(c) failed to comply with any order, ruling, instruction,
requirement, or recommendation of the
Commissioner;
(d) exceeded its power to the prejudice of its
members;
(e) conducted its business fraudulently or
hazardously;
(f) rendered its affairs and condition to one of
insolvency; or
(g) failed to carry out its aims and purposes for which
it was organized due to any cause.
After receipt of the order from the Commissioner
suspending or revoking the license, the association
must immediately exert efforts to remove such cause
or causes which brought about the order, and, upon
proper showing, may apply with the Commissioner for
the lifting of the order and restoration or revival of
the license so revoked or suspended.
Sec. 407. For failure to remove such cause or causes
which brought about the suspension or revocation of
the license of a mutual benefit association, the
Commissioner shall apply under this Code for an order
from the proper court to liquidate such association.
The provisions of titles fourteen and fifteen, chapter
three, pertaining to the appointment of a conservator
and proceedings upon insolvency of an insurance
company, shall, insofar as practicable, apply to
mutual benefit associations.
Sec. 408. To secure the enforcement of any provision
under this title, the Commissioner may issue such
rules, rulings, instructions, orders and circulars,
subject to the approval of the Secretary of Finance.
Sec. 409. The violation of any provision of this title
shall subject the person violating or the officer of the
association responsible therefor to a fine of not
exceeding one thousand pesos, or imprisonment of
not exceeding three years, or both such fine and
imprisonment, at the discretion of the court.
Title 2
TRUSTS FOR CHARITABLE USES
Sec. 410. The term "trust for charitable uses", within
the intent of this Code, shall include, all the real or
personal properties or funds, as well as those
acquired with the fruits or income therefrom or in
exchange or substitution thereof, given to or received
by any person, corporation, association, foundation,
or entity, except the National Government, its
instrumentalities or political subdivisions, for
charitable, benevolent, educational, pious, religious,
or other uses for the benefit of the public at large or a
particular portion thereof or for the benefit of an
indefinite number of persons.
Sec. 411. The term "trustee" shall include any
individual, corporation, association, foundation, or
entity, except the National Government, its
instrumentalities or political subdivisions, in charge of,
or acting for, or concerned with the administration of,
the trust referred to in the section immediately
preceding and with the proper application of trust
property.
Sec. 412. The term "trust property" shall include all
real or personal properties or funds pertaining to the
trust as well as those acquired with the fruits or
income therefrom or in exchange or substitution
thereof.
Sec. 413. All trustees shall, before entering in the
performance of the duties of their trust, obtain a
certificate of registration from the Commissioner.
Trustees who are already discharging the duties of
their trust on the date this Code becomes effective
may continue as such, subject to the provisions of
this Code.
All provisions of this Code governing mutual benefit
associations and such other provisions herein,
whenever practicable and necessary, shall be
applicable to trusts for charitable uses.
Chapter VIII
THE INSURANCE COMMISSIONER
Title 1
ADMINISTRATIVE AND ADJUDICATORY POWERS
Sec. 414. The Insurance Commissioner shall have the
duty to see that all laws relating to insurance,
insurance companies and other insurance matters,
mutual benefit associations, and trusts for charitable
uses are faithfully executed and to perform the duties
imposed upon him by this Code, and shall,
notwithstanding any existing laws to the contrary,
have sole and exclusive authority to regulate the
issuance and sale of variable contracts as defined in
section two hundred thirty-two and to provide for the
licensing of persons selling such contracts, and to
issue such reasonable rules and regulations governing
the same.
The Commissioner may issue such rulings,
instructions, circulars, orders and decision as he may
deem necessary to secure the enforcement of the
provisions of this Code, subject to the approval of the
Secretary of Finance. Except as otherwise specified,
decisions made by the Commissioner shall be
appealable to the Secretary of Finance.
Sec. 415. In addition to the administrative sanctions
provided elsewhere in this Code, the Insurance
Commissioner is hereby authorized, at his discretion,
to impose upon the insurance companies, their
directors and/or officers and/or agents, for any willful
failure or refusal to comply with, or violation of any
provision of this Code, or any order, instruction,
regulation, or ruling of the Insurance Commissioner,
or any commission or irregularities, and/or conducting
business in an unsafe or unsound manner as may be
determined by the Insurance Commissioner, the
following:chanroblesvirtuallawlibrary
(a) fines not in excess of five hundred pesos a day;
and
(b) suspension, or after due hearing, removal of
directors and/or officers and/or agents.
Sec. 416. The Commissioner shall have the power to
adjudicate claims and complaints involving any loss,
damage or liability for which in insurer may be
answerable under any kind of policy or contract of
insurance, or for which such insurer may be liable
under a contract of suretyship, or for which a
reinsurer may be sued under any contract of
reinsurance it may have entered into; or for which a
mutual benefit association may be held liable under
the membership certificates it has issued to its
members, where the amount of any such loss,
damage or liability, excluding interest, cost and
attorney's fees, being claimed or sued upon any kind
of insurance, bond, reinsurance contract, or
membership certificate does not exceed in any single
claim one hundred thousand pesos.
The insurer or surety may, in the same action file a
counterclaim against the insured or the obligee.
The insurer or surety may also file a cross-claim
against a party for any claim arising out of the
transaction or occurrence that is the subject matter of
the original action or of a counterclaim therein.
With leave of the Commissioner, an insurer or surety
may file a third-party complaint against its reinsurers
for indemnification, contribution, subrogation or any
other relief, in respect of the transaction that is the
subject matter of the original action filed with the
Commissioner.
The party filing an action pursuant to the provisions
of this section thereby submits his person to the
jurisdiction of the Commissioner. The Commissioner
shall acquire jurisdiction over the person of the
impleaded party or parties in accordance with and
pursuant to the provisions of the Rules of Court.
The authority to adjudicate granted to the
Commissioner under this section shall be concurrent
with that of the civil courts, but the filing of a
complaint with the Commissioner shall preclude the
civil courts from taking cognizance of a suit involving
the same subject matter.
Any decision, order or ruling rendered by the
Commissioner after a hearing shall have the force and
effect of a judgment. Any party may appeal from a
final order, ruling or decision of the Commissioner by
filing with the Commissioner within thirty days from
receipt of copy of such order, ruling or decision a
notice of appeal to the Intermediate Appellate Court
in the manner provided for in the Rules of Court for
appeals from the Regional Trial Court to the
Intermediate Appellate Court. (As amended by Batas
Pambansa Blg. 874).
As soon as a decision, order or ruling has become
final and executory, the Commissioner shall motu
proprio or on motion of the interested party, issue a
writ of execution requiring the sheriff or the proper
officer to whom it is directed to execute said decision,
order or award, pursuant to Rule thirty-nine of
the Rules of Court.
For the purpose of any proceeding under this section,
the Commissioner, or any officer thereof designated
by him, empowered to administer oaths and
affirmation, subpoena witnesses, compel their
attendance, take evidence, and require the production
of any books, papers, documents, or contracts or
other records which are relevant or material to the
inquiry. In case of contumacy by, or refusal to obey a
subpoena issued to any person, the Commissioner
may invoke the aid of any court of first instance
within the jurisdiction of which such proceeding is
carried on, where such person resides or carries on
his own business, in requiring the attendance and
testimony of witnesses and the production of books,
papers, documents, contracts or other records. And
such court may issue an order requiring such person
to appear before the Commissioner, or officer
designated by the Commissioner, there to produce
records, if so ordered or to give testimony touching
the matter in question. Any failure to obey such order
of the court may be published by such court as a
contempt thereof.
A full and complete record shall be kept of all
proceedings had before the commissioner, or the
officers thereof designated by him, and all testimony
shall be taken down and transcribed by a
stenographer appointed by the Commissioner.
A transcribed copy of the evidence and proceeding, or
any specific part thereof, of any hearing taken by a
stenographer appointed by the Commissioner, being
certified by such stenographer to be a true and
correct transcript of the testimony on this hearing of a
particular witness, or of a specific proof thereof,
carefully compared by him from his original notes,
and to be a correct statement of evidence and
proceeding had in such hearing so purporting to be
taken and subscribed, may be received as evidence
by the Commissioner and by any court with the same
effect as if such stenographer were present and
testified to the facts so certified. (As amended by
Presidential Decree No. 1455).
Title 2
FEES AND OTHER SOURCES OF FUNDS
Sec. 417. (1) For the issuance or renewal of
certificates of authority, licenses and certificates of
registration, pursuant to pertinent provisions of this
Code, the Commissioner shall collect and receive fees
which shall be not less than the
following:chanroblesvirtuallawlibrary
For each certificate of authority issued to an
insurance company doing business in the Philippines,
two hundred pesos.
For each special certificate of authority issued to a
servicing insurance company, one hundred pesos.
For each license issued to a general agent of an
insurance company, fifty pesos.
For each license issued to an insurance agent,
twenty-five pesos.
For each license issued to an agent of variable
contract policy, twenty-five pesos.
For each license issued to an insurance broker, one
hundred pesos.
For each license issued to an reinsurance broker, one
hundred pesos.
For each license issued to an insurance adjuster, one
hundred pesos.
For each certificate of registration issued to an
actuary, fifty pesos.
For each certificate of registration issued to a resident
agent, fifty pesos.
For each license issued to a rating organization, one
hundred pesos.
For each certificate of registration issued to a non-life
company underwriter, fifty pesos.
For each license issued to a mutual benefit
association, ten pesos.
For each certificate of registration issued to a trust for
charitable uses, ten pesos.
All certificates of authority and all other licenses, as
well as all certificates of registration, issued to any
person, partnership, association or corporation under
the pertinent provisions of this Code for which no
expiration date has been prescribed, shall expire on
the last day of June of each year and shall be
renewed annually upon application therefor and
payment of the corresponding fee, if the licensee or
holder of such license or certificate is continuing to
comply with all the applicable provisions of existing
laws, and of rules, instructions, orders and decisions
of the Commissioner.
(2) For the filing of the annual statement referred to
in section two hundred twenty-three, the
Commissioner shall collect and receive from the
insurance company so filing a fee of five hundred
pesos: Provided, That a fine of one hundred pesos
shall be imposed and collected by the Commissioner
for each week of delay, or any fraction thereof, in the
filing of the annual statement.
For the filing of annual statement referred to in
section four hundred, the Commissioner shall collect
and receive from the mutual benefit association so
filing a fee of ten pesos: Provided, That a fine of ten
pesos shall be imposed and collected by the
Commissioner for each week of delay, or any fraction
thereof, in the filing of the annual statement.
(3) For the examination prescribed in section two
hundred forty-six, the Commissioner shall collect and
receive fees according to the amount of its total
assets, in the case of a domestic company, or of its
assets in the Philippines, in the case of a foreign
company, as follows:chanroblesvirtuallawlibrary
(a) Two million pesos or more but less than four
million pesos, Four hundred pesos;
(b) Four million pesos or more but less than six
million pesos, Eight hundred pesos;
(c) Six million pesos or more but less than eight registered under the provisions of this Code and shall
million pesos, One thousand two hundred pesos; be governed by the provisions thereof: Provided,
(d) Eight million pesos or more but less than ten however, That where any such person, partnership,
million pesos, One thousand six hundred pesos; association or corporation is affected by the new
(e) Ten million pesos or more, Two thousand pesos; requirements of this Code, said person, partnership
Provided, That if the said examination is made in association or corporation shall, unless otherwise
places outside the Metropolitan Manila area, besides herein provided, be given a period of one year from
these fees, the Commissioner shall require of the the effectivity of this Code within which to comply
company examined the payment of the actual and with the same.
necessary travelling and subsistence expenses of the Sec. 422. Except as expressly provided by this Code,
examiner or examiners concerned. all laws or parts thereof inconsistent with any
For the examination prescribed in section three provision of this Code shall be deemed repealed.
hundred ninety-nine, the Commissioner shall collect Sec. 423. Should any provisions of this Code or any
and receive a minimum fee of one hundred pesos part thereof be declared invalid, the other provisions,
from the mutual benefit association so far as they are separable from the invalid ones,
examined:Provided, That if such association has total shall remain in force.
assets of more than one hundred thousand pesos, an Sec. 424. This Code shall take effect immediately.
additional fee of ten pesos for every fifty thousand DONE in the City of Manila, this 18th day of
pesos in excess thereof shall be imposed: Provided, December, in the year of Our Lord, nineteen hundred
further, That such fee shall not exceed two thousand and seventy-four.
pesos.
(4) For the filing of an application to withdraw from
the Philippines under title eighteen, the Commissioner
shall collect and receive from the foreign company so
withdrawing a fee of one thousand pesos.
(5) The Commissioner may fix and collect fees or
charges for documents, transcripts, or other materials
which may be furnished by him not in excess of
reasonable cost. (As amended by Presidential Decree
No. 1455).
Sec. 418. If the total expenses of the Insurance
Commissioner for every fiscal year exceed the
aggregate amount of the fees collected under the
pertinent provisions of this Code, the excess shall be
charged against the Insurance Fund, which shall
hereafter be created out of the proceeds of taxes on
insurance premiums mentioned in section two
hundred fifty-five of the National Internal Revenue
Code, as amended: Provided, however, That pending
the creation of said Insurance Fund, the provisions of
section two, three and four of Republic Act Numbered
Two Hundred Seventy-Five, shall continue to remain
in force and effect.
MISCELLANEOUS PROVISIONS
Sec. 419. Any person, company or corporation subject
to the supervision and control of the Commissioner
who violates any provision of this Code, for which no
penalty is provided, shall be deemed guilty of a penal
offense, and upon conviction be punished by a fine
not exceeding ten thousand pesos or imprisonment of
six months, or both, at the discretion of the court.
If the offense is committed by a company or
corporation, the officers, directors, or other persons
responsible for its operation, management, or
administration, unless it can be proved that they have
taken no part in the commission of the offense, shall
likewise be guilty of a penal offense, and upon
conviction be punished by a fine not exceeding ten
thousand pesos or imprisonment of six months, or
both, at the discretion of the court.
Sec. 420. All criminal actions for the violation of any
of the provisions of this Code shall prescribed after
three years from the discovery of such
violation: Provided, That such actions shall in any
event prescribe after ten years from the commission
of such violation.
Sec. 421. Any person, partnership, association or
corporation heretofore authorized, licensed or
registered by the Insurance Commissioner shall be
deemed to have been authorized, licensed or